news


Sky and Vodafone publish their objections to the Virgin/O2 UK merger

The CMA has published issues statements from Sky and Vodafone submitted as part of its investigation into the proposed merger of O2 UK and Virgin Media.

This phase of the Competition and Markets Authority review invites interested parties to speak now or forever hold their peace. It looks like Sky and Vodafone are the only ones to have raised objections. Sky seems worried about the merged company’s incentive to keep offering a decent wholesale service to MVNOs, while Vodafone just doesn’t like the thought of there being another converged player to deal with.

Here’s the key bit of Sky’s submission:

For the following reasons, Sky considers that post-merger the Merged Entity will have both the incentive and ability to engage in input foreclosure:

Incentive – O2’s incentives to provide wholesale mobile services on favourable terms… will materially reduce as the Merged Entity pursues increased uptake of fixed/mobile bundles benefitting from its converged and vertically integrated operations. According to the Parties’ own public statements, fixed/mobile convergence is a key rationale for the Proposed Merger at a time when interest in such services in the UK is increasing…; and

Ability – the Merged Entity will have the ability to degrade Sky’s mobile service. Pre-Merger, Sky considers that O2 is a willing partner that is incentivised to secure distribution to Sky’s fixed customer base and to resolve any commercial differences. Post-Merger, the change in O2’s incentives means it is uncertain to remain a willing partner and would have less incentive to resolve any commercial differences… it is impossible to provide contractually for all commercial circumstances or market developments over a long-term deal

And here are the concluding paragraphs of Vodafone’s mammoth submission:

  1. If this transaction proceeds, as mentioned above the UK market will be dominated by two operators that serve more than double the number of fixed and mobile customers compared to their nearest competitor.
  2. Procuring wholesale network products gives operators that do not have network or only have network in one part of the market (fixed or mobile) the ability to provide converged retail services. If converged network operators are allowed to follow an input foreclosure strategy and frustrate supply of these wholesale products to other operators in an increasingly converged market, the competitiveness of the overall market will suffer.
  3. Returns in UK telecoms markets are low, debt ratios are high and mobile network costs are set to increase substantially. This is driven by the need to replace Huawei technology, additional network security requirements being imposed and the rollout of 5G technology, together with the need for additional 5G infill sites. However, the benefits for society of upgraded mobile technology are wide and meaningful. Fixed networks in the UK also require fibre investment and upgrading to ensure the ever-increasing technology needs of the UK are met.
  4. In considering [CONFIDENTIAL] the two clearly identified theories of harm, the CMA should consider this overarching longer-term potential harm for UK telecoms markets and focus on ensuring any remedies enable other competing operators in the market to credibly compete with the two very large-scale vertically-integrated operators by securing competitive wholesale access in both fixed and mobile markets. This will help ensure a more competitive enduring landscape, to the ultimate benefit of consumers.

Liberty Global and Telefónica obviously don’t agree, but their comprehensive response is so replete with legalese mumbo-jumbo that it’s hard to identify the definitive bits. So we invite you to sift through it yourself if you’re sitting comfortably.

In essence both Sky and Vodafone seem to be objecting to the very concept of a converged operator. Their objections are not entirely without merit, but for them to be taken seriously the CMA would effectively have to conclude that the approval of the BT/EE acquisition was a mistake. Since that seems to have harmed neither the wholesale market nor the consumer, we would expect the CMA to have little sympathy for these objections.


8 comments

  1. Avatar David Reynell 25/02/2021 @ 4:17 pm

    Bit hypocritical of VF to raise issues with mergers in the U.K. market, when they’ve pursed the same strategy themselves in other EU markets.

    • Avatar Adam 25/02/2021 @ 7:00 pm

      Their objection is valid regardless of what has or has not happened in other markets. The Virgin/O2 merger is bad for competition. I’m not a fan of any of these companies by the way, but allowing one company to have such a huge share of the market, home and mobile, is bad for everybody.

  2. Avatar Valentinas 25/02/2021 @ 7:26 pm

    Uk Internet price is very high. Some countries 100 MB speed 5 euro p.m
    In uk very expensive

  3. Avatar William Bidwell 25/02/2021 @ 8:59 pm

    It comes down to the fact that EE have got the market as regards being part of bt cant understand about objecting it’s all jealousy 02 are still my faverate mobile

  4. Avatar Ozimzim 26/02/2021 @ 4:26 pm

    In my opinion Vodafone is only objecting because the merger will give customers a more favourable option over the highly sub-standard service they offer! They are the worst! Sky customer services … great but the merger will make them a much smaller player in terms of size; my heart goes out to them. I have no sympathy for Vodafone.

  5. Avatar Nick 26/02/2021 @ 6:13 pm

    Sky has too long dominated pay tv for too long withholding channels from BT TV,Virgin TV and other smaller players. Sky also made some broadcasters sign an agreement that prohibited them from operating on Rival pay TV services.

    As for Vodafone, they have teamed up with Liberty Global the owners of Virgin Media all around Europe and taken over Liberty’s assets. Vodafone have sat on there hands for too long at launching a pay tv service with its successful home broadband.

    BT/EE have not objected against this merger neither have TalkTalk or Hutchison 3G (Three).

    Vodafone have self destroyed themselves with poor customer service and shoddy billing systems that have led them from market leader in 1999-2001 to nearly the third largest network in terms of customers.

    Three (Hutchison 3G) have leaped from 9 million customers a few years ago to 13 million, they have aggressive marketing campaigns, low prices and better customer services. Yes Three has foreign call centres but they all do except BT/EE. The worst call centres are probably Virgin and Vodafone, they haven’t a clue at what they’re doing.

    To the person who said Internet is too expensive in the UK, you need to bare in mind that countries like France and Holland, competition is very poor, the UK has a lot of competition and to some extent has deprived BT Openreach of revenue. They are businesses not charities so there has to be a margin of profit amongst investment. There are very cheap deals, for a start I use TalkTalk and for 80mb broadband and unlimited calls to landlines and mobiles I pay £19 including line rental, yes you can probably find 100mb speed in Europe but there’s a lot of other charges along with it, nobody likes Orange the main operator in France, it’s total BS!

    Also the BT purchase of EE went through fine and that’s 100% ownership. The Virgin/O2 deal is going to be a 50/50 venture, there are already a lot of people already using Virgin Media for fixed line services and use O2 for mobile. It’s not going to make much difference to competition or prices. If you don’t like them move to someone else.

  6. Avatar Nick 26/02/2021 @ 6:20 pm

    By the way all pay tv operators in the UK with the exception of Virgin TV are actually all supplied by Sky or there subsidiary Now TV. Sky also demands nearly £30 million a year for the Sky channels on Virgin TV.

    So Sky are very much in control, as for sports this is the first time someone has actually successfully competed with Sky Sports with the offering of BT Sport.

    Don’t forget Disney is now a bigger content provider that now owns all Fox content and channels including Fox,National Geographic,Disney channels on Disney plus they have all been removed from Sky because of them being difficult to negotiate with, Virgin TV is too small for Disney to continue the Disney channels. It’s only a matter of time before Disney removes all the other non-Disney branded channels like National Geographic.

  7. Avatar Stuart Lawson Beattie 01/03/2021 @ 2:27 pm

    My Lord, I am unimpressed with these answerts whether they are factual or not. No One is speaking for the customer.
    Speaking from experience, I have had contracts with all of these companies and they are all a shoddy joke, up their own backsides and they onky compete and cherry pick for the easiest route to the fastest buck, there is no morality or integrity in these deals.
    BT should not have been allowed to take EE and this merger should not go ahead, these companies like Virgin have their fingers in too many pies, other business and how can any of them seak of customer service when they use foreign companies for slave labour just like BT originally did.
    BT are a sham and a complete fraud, they ony profit due to the fact that many elderly customers simply want a working phoneline, but sadly they pay the most almost 3 times the average phone and broiadband deal and customers are confused, they do not realise the guaranteed speeds for broadband are fixed wire, people use wifi now so their connection is always a lot less speed than they think.
    I can not understand how companies like EE, who used to be Orange in the UK, BT Cellnet and so many others can cease trading and just change names, it is all perks and fraud, none of it is respectable, it is cheating, imbezzlement and coersion into making people sign 2 year contracts with shabby or no customer service.
    BT Sport is another rip-off, how can anyone sign up to Sky Sports and not be able to watch all sports???
    Sky and BT are bith ripping off football fans, Tennis fans and many others becasue the monopolies are forcing them to pay for at least 2 deals with different companies and apart form that Virgin are taking over my bank, do I have a choice as a customer, frankly not.
    Can I also say wake up to the guy who stated you can just go somewhere else??? Many people cannot get simple phone/broadband deals at low prices because there are very few deals going, so who is he kidding??
    There are people who cannot pass credit checks due to being on disability and others who have credit or bankcruptcy issues, why should they be stopped from getting a phoneline?
    To all the commenters here, I wish you luck but I don’t hold any faith with any of these companies, they are all sharks, BT had the market for many years, they are the original sharks, Sky are a close second and all the rest are a shamble, there I said it, thanks and take care!!!
    In reference to my statement on foreign call centres, which companies like Asda and others use, it is a gross insult to customers to be forced to engage dialogue with persons who may indeed speak the language but they have no idea of local accents or local culture and what is the point in using an agency who cannot say or spell someone’s name???
    The word we are looking for is integrity, not merger, competition, or business, bless you all,
    Stuart Lawson Beattie

Leave a comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Polls

Which of the following would be the best long-term household broadband solution?

Loading ... Loading ...