Virgin Media and O2 merger referred for full UK competition investigation

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Virgin and O2’s planned £31bn merger is to be scrutinised by the UK’s competition authority to assess if would mean higher prices for rivals using their wholesale services.

The Competition and Markets Authority (CMA) said the phase 2 investigation will start immediately and follows a request from the two telecoms companies for a fast-track review of the merger.

The CMA added that it had accepted the request given the potential impact on competition in several telecoms markets in the UK.

Both Virgin and O2 provide certain wholesale services to other mobile network operators in the UK, wholesale mobile services and mobile backhaul, respectively, said the CMA, adding it was concerned that when merged Virgin and O2 might have an incentive to raise prices or reduce their quality, ultimately leading to a worse deal for UK consumers.

Liberty Global owns Virgin Media and Virgin Mobile in the UK while Spanish group Telefónica owns O2 in the UK.

A combined O2/Virgin would have 32mln direct customers as well as 34mln non-direct clients such as Tesco Mobile.

It would compete with BT Group PLC (LON:BT.A), which owns EE, as well as Vodafone PLC (LON:VOD), Talktalk Telecom Group PLC (LON:TALK), Sky and Three.

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