An in-depth investigation into the £31 billion mega-merger between Virgin Media and O2 has been launched by the Competition and Markets Authority (CMA).
The Phase 2 investigation will be launched immediately and comes following a request from the companies for the watchdog to give the deal the green light quickly.
Under a “fast-track” process, investigators from the CMA will look at whether the deal could lessen competition for UK customers of the mobile phone and broadband giants.
The CMA said it is “concerned that, following the merger, Virgin and O2 may have an incentive to raise prices or reduce the quality of these wholesale services, ultimately leading to a worse deal for UK consumers”.
Previously, the CMA blocked a merger between O2 and rival network Three, although it has previously waved through BT’s deal with EE.
The decision to launch a fast-tracked investigation comes where “there is sufficient evidence at an early stage of the investigation for the CMA to conclude that there is a realistic prospect that the transaction would result in a substantial lessening of competition in one or more markets”, it said.
Evidence will be submitted by the networks’ parent companies, Liberty Global, which owns Virgin Media and Virgin Mobile in the UK, along with Telefonica, which owns O2.
📲 We're now fast tracking the proposed merger of Virgin with O2 for an in-depth Phase 2 investigation.
We'll be looking at the impact of the proposed merger on telecommunications markets in the UK.
— Competition & Markets Authority (@CMAgovUK) December 11, 2020
A spokesperson for Liberty Global and Telefonica said: “Liberty Global and Telefonica are pleased that the CMA has agreed to the parties’ request to start a ‘fast-track’ to Phase 2 process in the UK.
“We look forward to working constructively with the CMA to achieve a positive outcome. We continue to expect the transaction to close around the middle of next year.”
The merger, first announced in May, would bring together O2’s 34 million customers on its mobile network with Virgin’s 5.3 million broadband, pay-TV and mobile users.
The deal values Virgin Media at £18.7 billion and O2 at £12.7 billion.
At the time the deal was announced, the companies said it would create a “full converged platform” for customers, and will mean an investment of £10 billion in the UK over the next five years.
The CMA was only granted permission to investigate the deal after the European Commission handed over the case in November.
Under European law, the biggest mergers are generally dealt with by the commission’s regulators in Brussels.
But the CMA asked Brussels regulators to hand the case back because it primarily only impacted UK customers and that any findings would come after the Brexit transition period had ended.