Both Virgin and O2 sell wholesale services to a number of
mobile operators in the UK. Virgin supplies wholesale leased
lines to mobile operators and O2 provides its mobile network
to companies that do not have their own.
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 merger was referred to a group of independent CMA Panel
members for an in-depth Phase 2 investigation. The Group has
concluded that the deal is unlikely to lead to any
substantial lessening of competition for a number of reasons:
- The costs of leased lines are only a relatively small
element of rival mobile companies’ overall costs, so it is
unlikely that Virgin would be able to raise leased-line 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.
- As with leased-line services, there are a number of other
companies that provide mobile networks for telecoms firms to
use, meaning O2 will need to keep its service competitive
with its wholesale rivals in order to maintain this business.
Martin Coleman, CMA Panel Inquiry Chair, said:
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.
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.
More information is available on the Liberty Global plc /
Telefónica S.A. merger inquiry case page.
