U.K. Gives Green Light to $44 Billion Merger of Virgin Media and O2

The United Kingdom’s Competition and Markets Authority said Thursday that it had given its approval to the proposed merger of broadband and mobile-phone operators Virgin Media and Virgin Mobile with cell-phone company O2. The deal is reported to be valued at £31 billion ($44 billion).

“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,” said CMA spokesman Martin Coleman, who headed a special panel which investigated the proposed deal.

The merger would bring together a company with 46 million video, broadband and mobile subscribers, including 3.7 million pay-TV subscribers, 5.3 million broadband customers, 4.6 million fixed-line voice subscribers, and 32 million mobile subscribers. The combined revenue of the businesses would be £11 billion ($14.2 billion).

“The CMA was initially concerned that, following the merger, Virgin and O2 could raise prices or reduce the quality of these wholesale services. If this were to happen, it could lead to other companies being forced to offer lower quality mobile services or increase their retail prices which would negatively impact consumers,” the CMA said in a statement on its website.

“The merger was referred to a group of independent CMA Panel members for an in-depth Phase 2 investigation. The (CMA appointed) group has concluded that the deal is unlikely to lead to any substantial lessening of competition.”

The U.K. antitrust organization kicked off its enquiry in September last year, while U.K. was still part of the European Union. The European Commission was notified about the proposed merger by Liberty Global, which owns Virgin Media and Virgin Mobile, and Telefónica, which owns O2 on Sept. 30.

Telefonica CEO Jose Maria Alvarez-Pallete said when the deal was proposed: “Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the U.K., at a time when demand for connectivity has never been greater or more critical. We are creating a strong competitor with significant scale and financial strength to invest in U.K. digital infrastructure and give millions of consumer, business and public sector customers more choice and value.”

Mike Fries, CEO of Liberty Global, said at the time: “Virgin Media has redefined broadband and entertainment in the U.K. with lightning fast speeds and the most innovative video platform. And O2 is widely recognized as the most reliable and admired mobile operator in the U.K., always putting the customer first. With Virgin Media and O2 together, the future of convergence is here today.”

Source