Analyst: Virgin/O2 merger competition boost

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Having received provisional clearance by the UK’s Competition and Markets Authority (CMA), the proposed merger of Liberty Global-owned Virgin Media and Telefónica-owned O2 will bring together one of the UK’s four nationwide mobile networks and the UK’s only DOCSIS cable broadband network.

According to Gary Barton, a Principal Analyst at data and analytics company GlobalData, the merger, whilst reducing the number of telecoms providers in the UK market, will result in an increase in competition in both the consumer and B2B markets.

“The CMA blocked the previously-proposed merger between O2 and Three because it would have reduced the number of mobile network operators in the UK,” he notes. “However, the Virgin Media/O2 merger brings together a fixed network and a mobile network. The cost of providing increased capacity to support 5G networks has been a significant obstacle when rolling out the technology. The new company will be able to achieve cost savings by using Virgin’s fixed network to support the O2 mobile network.”

“These savings, on top of other internal savings, will save the new company an estimated £6.2 billion. This will strengthen Virgin Media/O2’s ability to compete on price when offering bundled and converged fixed and mobile services.”

Barton also suggests that the move will increase investment in next-generation communication assets in the UK and give increased competition to BT/Openreach. “The merger increases the ability and incentive for Liberty Global and Telefónica to invest in their UK assets after a period of uncertainty. Virgin’s cable broadband network is currently the only real alternative to the Openreach broadband network and strengthening this network will benefit consumers and businesses.”

“Many telecoms providers resell services from network-owning companies such as BT, Vodafone, Virgin Media, O2 and Three. Strengthening one of these providers will have wider benefits to the UK market than the immediate impact on O2 and Virgin Media,” he concludes.


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