CMA: Virgin And O2 Merger Referred For In-depth Phase 2 Investigation

(RTTNews) - The UK. Competition and Markets Authority or CMA said it has referred the proposed merger of Virgin Media, Inc. (VMED.L, VMED) and Virgin Mobile with O2, for an in-depth Phase 2 investigation.

Virgin Media and Virgin Mobile are owned by Liberty Global plc, while O2 is owned by Spanish telecom major Telefonica SA (TDE.L, TEF).

The move comes after Virgin and O2 requested that the CMA move quickly to the in-depth Phase 2 stage of its review through a 'fast-track' process.

According to the agency, merging companies can ask for a case to be fast tracked to Phase 2 where there is sufficient evidence at an early stage of the investigation to conclude that there is a realistic prospect that the transaction would result in a substantial lessening of competition in one or more markets. The option to fast track provides flexibility in the CMA process and enables such cases to progress efficiently and quickly.

The CMA said it accepted this request given the deal's potential impact on competition in several telecommunication markets in the UK, and the Phase 2 probe will begin immediately.

It was in May this year that Liberty Global and Telefonica agreed to merge their operating businesses in the U.K. to form a 50:50 joint venture.

Following a request from the CMA, the European Commission referred the proposed merger of Virgin Media and Virgin Mobile with O2 to the CMA for investigation on November 19.

The CMA now noted that both Virgin and O2 provide certain wholesale services to other mobile network operators in the UK.

The agency is concerned that, following the merger, Virgin and O2 may have an incentive to raise prices or reduce the quality of these wholesale services, ultimately leading to a worse deal for UK consumers.

The Phase 2 investigation will be overseen by an inquiry group chosen from the CMA's independent panel members. In the coming weeks, the group will publish an issues statement.