independent– A £31bn mega-merger between O2 and Virgin Media is being investigated by the competition watchdog over concerns it will result in a worse deal for mobile and broadband users.
The Competition and Markets Authority launched an in-depth probe after warning that the tie-up could cause prices to rise and service levels to decline.
Virgin Media and O2 provide wholesale mobile and broadband services to other businesses. The CMA is concerned that after a merger they might have an “incentive to raise prices or reduce the quality of these wholesale services, ultimately leading to a worse deal for UK consumers”.
It added: “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.”
If given the green light the merger would bring together O2’s 34 million mobile customers with Virgin’s 5.3 million broadband, pay-TV and mobile users.
The deal values Virgin Media at £18.7bn and O2 at £12.7bn.
In 2016, the CMA blocked a planned merger between O2 and rival network Three. However, it waved through BT’s takeover of EE which industry analysts say is more similar to Virgin Media and O2’s deal as it brought together a mobile network with a broadband-focused company.
The CMA was granted permission to investigate the deal in November after the European commission handed over the case to the UK regulator.
Under European law, the biggest mergers are usually handled by regulators in Brussels.
However, the CMA asked to take the case because it only impacts UK customers and the Brexit transition period will have ended by the time the investigation is complete.
Virgin Media and O2’s parent companies, Liberty Global and Telefonica respectively, will submit evidence in support of the merger going ahead before the CMA reaches a decision.