ao link
0 £0.00
This item was added to your basket
Credit Strategy homepage
LinkedIn
Twitter
Intelligence, Insight and community for responsible professionals in credit

Virgin Media and 02 merger gets provisional green light

The Competition and Markets Authority (CMA) has provisionally cleared the proposed merger of Virgin Media and Virgin Mobile with O2.

As well as retail services to consumers, both Virgin and O2 provide wholesale services to other UK mobile network operators in the UK – and this factor was an initial fear for the CMA.

 

Virgin provides wholesale leased lines to mobile networks such as Vodafone and Three, a process known in the industry as ‘backhaul’. Similarly, O2 provides the network for mobile operators including Sky and Lycamobile.

 

The CMA was concerned that, following the merger, Virgin and O2 could raise prices or reduce the quality of wholesale services, or withdraw them altogether. If this were to happen, the watchdog had warned, the quality of other companies’ mobile services could suffer and – if wholesale price increases were passed on by these firms to customers – retail prices could surge.

 

The CMA believed such a scenario might make Virgin and O2’s own service more attractive to retail customers, but would ultimately lead to a worse deal for consumers. Its review, therefore, focused largely on whether the merger could lead to reduced competition in wholesale services.

 

The outcome
The CMA’s inquiry group has now “provisionally concluded” that the deal is unlikely to lead to any substantial lessening of competition in the supply of wholesale services.

 

This is because of the following findings:

· Backhaul costs are only a small element of rival companies’ overall costs, so it’s unlikely Virgin could raise backhaul costs in a way that would lead to higher charges for consumers.

· There are other players in the market offering the same leased-line services, including BT Openreach - which has a much greater geographical reach than Virgin - and other smaller providers. This means the merged company will still need to maintain the competitiveness of its service or risk losing wholesale custom.

· Other companies provide mobile networks for telecoms firms, meaning O2 will need to keep its service competitive with wholesale rivals to maintain this business.

 

Martin Coleman, CMA panel inquiry chair, said: “Given the impact this deal could have in the UK, we needed to scrutinise this merger closely. A thorough analysis of the evidence gathered during our phase two investigation has shown that 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.”

Please login to continue reading this article.

Not a member?

Become a member

FREE registration. No credit card required

Register now
  • Stay up-to-date with industry news and appointments
  • Hear about events first
  • Read 1 free Premium article per month

Become a premium member

From as little as £3.48 per week

Become Premium
  • All the perks of a standard member plus:
  • Access to the entire Credit Strategy website
  • 12 months subscription to Credit Strategy Magazine
  • 25% discount to all conferences
  • Exclusive access to Premium Member only roundtables
  • 50% off award entry fees

GET THE LATEST INDUSTRY NEWS STRAIGHT TO YOUR INBOX

READ NEXT

FCA to streamline its decision-making processes

FCA to streamline its decision-making processes

Language changes needed to support diversity, report finds

Language changes needed to support diversity, report finds

Tesco Bank to close all personal current accounts

Tesco Bank to close all personal current accounts

Upcoming events

Credit Strategy
LinkedIn page

Member of

Did you find our website useful?

Thank you for your input

Thank you for your feedback

creditstrategy.co.uk – an online news and information service for the UK’s commercial and consumer credit industry. creditstrategy.co.uk is published by Shard Financial Media Limited, registered in England & Wales as 5481132, Axe & Bottle Court, 70 Newcomen St, London, SE1 1YT. All rights reserved. Credit Strategy is committed to diversity in the workplace. @ Copyright Shard Media Group