Virgin Media Says O2-Three Merger Should Go Ahead

Virgin Media has given its backing to the proposed £10.25bn merger between O2 and Three, suggesting any remedies imposed by competition authorities could be a good thing for the UK market.

Earlier this week, Ofcom CEO Sharon White said the deal would be bad for a UK mobile market that has benefited from intense competition, innovation and low prices, especially since Three, the smallest player, has had a tradition of disrupting the market in order to compete with larger rivals.

There are also suggestions that the European Commission (EC) is becoming less tolerant of market consolidation amid concerns of rising prices in markets where the number of operators has decreased.

Virgin Media support

This led to Three’s parent company, CK Hutchison, to promise to freeze prices for five years after the merger and invest £5 billion in mobile infrastructure.

Similar mergers have been given European approval in recent times, most notably in Ireland and Austria, but another deal between TeliaSonera and Telenor in Denmark was rejected after remedies could not be agreed upon.

In all cases, the proposed mergers reduced the number of operators from four to three and White said that since the 2013 merger between Three and Orange in Austria, mobile prices had risen significantly.

However Virgin Media, which operates a mobile virtual network operator (MVNO) using EE’s infrastructure believes any competition concerns can be dealt with without blocking the merger and claims the remedies imposed in the aforementioned markets helped operators also owned by Liberty Global.

“The Commission has previously cleared mobile mergers which resulted in a reduction in the number of mobile operators from four to three, subject to wholesale remedies,” said Virgin Media CEO Tom Mockridge. “In two of these cases, Austria and Ireland, Virgin Media’s parent company Liberty Global provides vigorous competition and consumer choice as a result of taking EU remedies.

“The same can be true in the UK. A combined O2-Three could have more to offer consumers and, crucially, more capacity for other providers who want to drive competition in their own right. With the right remedies, this deal could stimulate not curb competition.”

The company is no stranger to adopting stances that differ from many of its competitors, especially if it feels governments or regulators might create an anti-investment environment.

Whereas Sky, TalkTalk and others want BT and Openreach to be separated, Virgin Media does not believe investors in infrastructure should be penalised and opposes a breakup.