UK watchdog outlines concerns about Virgin Media/O2 merger

The UK Competition and Markets Authority has outlined its concerns about the proposed merger of Liberty Global’s Virgin Media and Telefónica-owned mobile player O2, with a focus on the potential impact of the pair’s combination on mobile wholesale markets.

The watchdog is focusing on the possible impact of the merger on the supply of wholesale mobile services to MVNOs and MNOs respectively.

The CMA said it is concerned that the combined company would potentially withhold or deteriorate its supply of wholesale mobile services to rival MVNOs, leading to reduced competition and giving MVNO customers incentives to migrate to the combined Virgin Media-O2 for mobile services.

The regulator said it was concerned about the impact on fixed MVNOs in particular – companies that provide bundles of fixed and mobile services that compete directly with the new entity.

These MVNOs include Sky, which currently purchases wholesale mobile services from O2. The CMA said that the latter does not currently have an incentive to foreclose the supply of wholesale services to Sky or other fixed MVNOs because it does not itself have a fixed-mobile bundled offering to any great extent.

The CMA is also concerned about the possible impact of the merger on the supply of wholesale leased lines to mobile network operators that use these for mobile backhaul

The watchdog pointed out that Virgin Media is currently the second largest provider of mobile backhaul to MNOs in the UK after BT Openreach.

While noting that the merger could also “result in some horizontal overlaps and further vertical links”, these were not likely to be significant enough to warrant investigation.