Virgin/O2 UK merger to close this month

The merger of UK mobile operator O2 with cableco Virgin Media is set to close in a matter of days, having cleared its final regulatory hurdle: the approval of the competition watchdog.

It was really a matter of ‘when’ and not ‘if’ the UK Competition and Markets Authority (CMA) would green light the proposed tie-up. The watchdog provisionally cleared the merger just over a month ago, a gave interested parties several weeks to submit comments. Clearly nothing came up to seriously challenge the CMA’s initial findings, enabling it to rubber stamp the deal.

This merger has been a fairly long time coming, with Telefonica and Liberty Global announcing the plan to integrate their UK business – O2 and Virgin Media respectively – just over a year ago. But once the CMA started moving on the approvals process it has all progressed pretty smoothly. And now the telcos say they will complete the merger by 1 June. That’s in just over a week’s time.

“This is a watershed moment in the history of telecommunications in the UK as we are now cleared to bring real choice where it hasn’t existed before, while investing in fibre and 5G that the UK needs to thrive. We thank the CMA for conducting a thorough and efficient review,” said Mike Fries, CEO of Liberty Global, and José Maria Alvarez-Pallete, CEO of Telefonica, in a canned statement.

It makes sense that both chief executives would want to have their say, the merged outfit being a 50:50 joint venture. But there’s something slightly uncomfortable about a joint statement; perhaps it’s the suggestion of decision-making by committee that doesn’t necessarily bode well for a new company with ambitions to take on the establishment – BT, that is – in the UK telecoms market.

Nonetheless, the parent companies have made a clear decision on who is in charge. As previously announced, Virgin Media’s current chief executive Lutz Schüler will serve as CEO of the merged entity (VO2?), while O2’s finance chief Patricia Cobian will become CFO.

“Lutz and Patricia are now set to take the reins and launch a national connectivity champion that will connect more people, ignite more businesses back to growth and power more communities for the greater good,” said Fries and Alvarez-Pallete (Frallete?).

In clearing the tie-up the CMA reiterated its stance that it will not impact upon competition in the UK, dismissing initial concerns that the wholesale market could suffer as a result of a major mobile network operator and major fixed player coming together.

“O2 and Virgin are important suppliers of services to other companies who serve millions of consumers. It was important to make sure that this merger would not leave these people worse off. That’s why we conducted an in-depth investigation,” said Martin Coleman, CMA Panel Inquiry Chair. “After looking closely at the deal, we are reassured that competition amongst mobile communications providers will remain strong and it is therefore unlikely that the merger would lead to higher prices or lower quality services,” he added. Nothing new there: it’s essentially what he said when the provisional clearance came in April.

The difference is that now – or very soon – we can stop talking about the impact of the ‘proposed’ merger of Virgin Media and O2 and start examining its actual impact. The tie-up should bring stronger competition to the UK market, provided the companies in question can successfully navigate the integration challenges that always accompany a JV.