The merger is expected to usher in a new era for fixed-mobile convergence in the UK
There were never any concerns for the retail market: The UK Competition and Markets Authority (CMA) has officially cleared the joint venture between Liberty Global and Telefonica, which will result in the merger between Virgin Media and O2. The authority is satisfied that the merger will not result in a significant reduction of competition – something on which the CMA was clear from the outset for retail markets, whereas there were some concerns at the wholesale level which triggered the Phase 2 investigation. However the CMA no longer has any concerns, and so has authorised the merger without any remedies.
What was the perceived problem? The CMA wanted to have a closer look at the possible impact of the merger on the markets for wholesale services to mobile operators. Virgin Media provides leased lines to MNOs such as Vodafone and Three, which they use for backhaul purposes. O2 is a host to several MVNOs (e.g. Sky, Lycamobile). A reduction in competition in those markets could have fed through to retail markets, ultimately resulting in a worse deal for consumers. The CMA’s investigation found that these concerns are unlikely to materialise, since Virgin Media would be unlikely to raise leased line costs in a way that leads to higher prices for consumers, and O2 will need to remain competitive in the market for wholesale mobile access if it wants to maintain that business. Both wholesale markets will likely remain competitive after the merger, and the merged entity has no incentive to withdraw from those markets or raise prices.
The rise of FMC in the UK? The merger will create a second fully converged operator in the UK, combining the footprint of Virgin Media’s fixed network (currently covering 53% of UK homes) and O2’s national mobile coverage. Bundling multiple services has been shown to result in better value for customers. So far only BT has been able to offer a true FMC proposition (also owning both its fixed and mobile network), and so this next dynamic of FMC has not played out yet in the UK as in other European countries, such as France, Netherlands, Portugal, and Spain among others.
Source: https://www.gov.uk/government/news/cma-gives-virgin-and-o2-merger-green-light
