Green light for Virgin Media, O2 £31bn merger

Photo: EPA

The long anticipated merger deal between Virgin Media and O2 moved a step closer to being finalized as the two companies received a key backing, BBC reported. The deal is valued at some £31bn and was provisionally approved by the UK's competition watchdog. The statement has been awaited since last December when The Competition and Markets Authority (CMA) launched an investigation of the proposal.

The deal is targeted at creating the UK's largest entertainment and telecoms firm, which could become a major rival to BT. O2 has about 34 million mobile phone users, while Virgin has about six million broadband and cable TV customers, and another three million mobile users.

As well as having its own subscribers, O2 provides the network for Tesco Mobile, Giffgaff and Sky Mobile. Virgin also provides wholesale "leased lines" to Vodafone and Three - which are key parts of the rival mobile networks' operations. Previously, the CMA had said it was concerned the merger would result in Virgin and O2 raising prices for such services, reducing their quality or withdrawing them altogether. The investigation concluded that the merger was "unlikely to lead to any substantial lessening of competition".

Both O2 and Virgin would have to keep their services competitive to "maintain this business", the CMA concluded. "The deal is unlikely to lead to higher prices or a reduced quality of mobile services - meaning customers should continue to benefit from strong competition," said Martin Coleman, CMA panel inquiry chair. "The blockbuster merger will transform the UK telecoms landscape and create a powerful new converged provider to rival BT," said CCS Insight analyst Kester Mann.

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