Virgin Media and O2 'blockbuster' merger provisionally approved

A £31bn merger between mobile networks Virgin Media and O2 has been provisionally approved by the UK's competition watchdog.

It will create one of the UK's largest entertainment and telecoms firms, which could become a major rival to BT.

The Competition and Markets Authority (CMA) launched an investigation into the proposals last December.

Analysts said it was a "blockbuster merger" that could create greater choice for consumers.

O2 has about 34 million mobile phone users, while Virgin has about six million broadband and cable TV customers, and another three million mobile users.

As well as having its own subscribers, O2 provides the network for Tesco Mobile, Giffgaff and Sky Mobile.

Leased lines

Virgin also provides wholesale "leased lines" to Vodafone and Three - which are key parts of the rival mobile networks' operations.

Previously, the CMA had said it was concerned the merger would result in Virgin and O2 raising prices for such services, reducing their quality or withdrawing them altogether.

This, in turn, would raise prices for consumers at rival networks, driving them to Virgin and O2.

But the investigation concluded that the merger was "unlikely to lead to any substantial lessening of competition".

It said "other players" offered leased-line services, including BT which has a larger geographical reach than Virgin.

Both O2 and Virgin would have to keep their services competitive to "maintain this business", the CMA concluded.

'Blockbuster merger'

"The deal is unlikely to lead to higher prices or a reduced quality of mobile services - meaning customers should continue to benefit from strong competition," said Martin Coleman, CMA panel inquiry chair.

"The blockbuster merger will transform the UK telecoms landscape and create a powerful new converged provider to rival BT," said CCS Insight analyst Kester Mann.

"The joint venture will need to dig deep to fund the costly expansion of cable and 5G services throughout the UK."

The deal could be completed by summer, said Ernest Doku, mobiles expert at comparison website Uswitch.

“There’s the potential for the combined firms to make millions of pounds of annual savings, and for consumers, this tie-up could mean a greater choice of entertainment and faster speeds.

“However, it’s vital that the combined brands maintain the high standards of service that customers have come to expect.”