Regulator clears Telefonica, Liberty Global UK megadeal

The UK’s competition authority dismissed concerns a merger of mobile operator O2 and fixed player Virgin Media would have negative implications on wholesale services, provisionally clearing the deal without conditions.

In a statement, the Competition and Markets Authority (CMA) said its in-depth investigation concluded the combination of the businesses was unlikely to have a detrimental effect on either fixed or mobile wholesale markets given the scope of rivals.

It had already dismissed any competition issues related to overlap with the two brands’ retail services prior to the start of the detailed probe.

Detailing the rationale behind its wholesale decision, the CMA noted backhaul was only a “relatively small element of rival mobile companies’ overall costs” meaning a rise in price from Virgin Media would be unlikely to drip through to consumers.

The regulator also noted rivals such as BT Openreach offered similar leased-line services but over a larger geographical reach, forcing the newly merged company to remain competitive.

In terms of supply to MVNOs on O2 UK’s network, the CMA said there were a number of competitors in this sector, meaning the operator will need to “keep its service competitive with its wholesale rivals in order to maintain this business”.

It did not look into the implications of overlapping consumer services due to the limited scale of MVNO Virgin Mobile’s operation.

Criticism
Telefonica and Liberty Global announced the proposed deal in May 2020 and, after a tussle with the European Commission over which regulator had jurisdiction on the matter, the CMA opened an in-depth probe in December 2020.

During the consultation part of the investigation, Vodafone UK and MVNO Sky Mobile complained about the deal. Vodafone argued it would lead to a “substantial lessening of competition” due partly to the implications for backhaul using fibre leased lines.

Sky Mobile focused its criticism on deemed implications for the MVNO sector.

Interested parties have a deadline of 5 May to submit any comments on the provisional decision they wish to have taken into account ahead of the ruling becoming final. Mobile World Live