Virgin and O2′s $44 billion telecoms merger cleared by UK competition watchdog

LONDON — Virgin Media and O2′s £31.4 billion ($44.4 billion) merger has been approved by U.K. competition regulators

Britain’s Competition and Markets Authority said Thursday it had greenlit the deal after finding that it was unlikely to lead to a substantial lessening of competition in the telecoms market.

The CMA had earlier expressed concern that the tie-up may lead to price increases or reduce the quality of wholesale services, which it says would have negatively impacted consumers.

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The watchdog said there was sufficient competition in the leased-line market from players like BT Openreach, meaning the combined company would “still need to maintain the competitiveness of its service or risk losing wholesale custom.”

At the same time, the CMA said O2 faces stiff competition in the mobile networks market.

“O2 and Virgin are important suppliers of services to other companies who serve millions of consumers. It was important to make sure that this merger would not leave these people worse off. That’s why we conducted an in-depth investigation,” said Martin Coleman, CMA panel inquiry chair.

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“After looking closely at the deal, we are reassured that competition amongst mobile communications providers will remain strong and it is therefore unlikely that the merger would lead to higher prices or lower quality services,” Coleman added.

The deal between Liberty Global’s Virgin and Telefonica’s O2 will lead to the creation of a new giant in the U.K. telecoms industry. The new group will have a total of 46 million video, broadband, and mobile subscribers and £11 billion in revenues, the companies said in May last year when they announced the transaction.

“This is a watershed moment in the history of telecommunications in the U.K. as we are now cleared to bring real choice where it hasn’t existed before while investing in fiber and 5G that the U.K. needs to thrive,” Liberty Global CEO Mike Fries and Telefonica chief José Maria Alvarez-Pallete said in a joint statement Thursday. “We thank the CMA for conducting a thorough and efficient review.”

Shares of Telefonica were down 1.3% in early deals on Thursday.

The combination of the two companies will also allow Virgin Media to tap O2′s experience in developing next-generation 5G mobile networks, which are expected to be a significant driver of sales for telecommunications companies in the future.