A planned merger between Virgin Media and O2 has been given the go-ahead by the Competition and Markets Authority (CMA) following a review.

The UK watchdog said that it had been clear from the outset that it was not concerned about overlapping retail services like mobile, because of the small size of Virgin Mobile. Instead, the investigation focused on whether the partnership could lead to reduced competition in wholesale services.

Virgin has wholesale leased lines to mobile telecommunications companies, like Vodafone and Three, which they use to connect key parts of their network. This is often known as ‘backhaul.’

O2 also offers mobile operators use of its network, including Sky and Lycamobile, which do not have their own mobile networks.

The CMA said it was initially concerned that following the merger Virgin and O2 could raise prices or reduce the quality of these wholesale services, or withdraw them altogether. This would mean the quality of these other companies’ mobile services could be impacted, if wholesale price increases were passed on to their customers.

But having examined the evidence, the CMA’s inquiry group concluded that the deal is unlikely to lead to any substantial lessening of competition because backhaul costs are only a relatively small element of rival mobile companies’ overall costs, there are other players in the market offering the same leased-line services like BT Openreach, and there are also several companies that provide mobile networks for telecoms companies, which means O2 will need to keep its service competitive.

“Given the impact this deal could have in the UK, we needed to scrutinise this merger closely,” said Martin Coleman, CMA panel inquiry chair. “A thorough analysis of the evidence gathered during our phase 2 investigation has shown that 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.”

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