The upcoming GBP31bn ($39.7bn) mega-merger between Virgin Media and O2 did not come as a surprise given the highly competitive environment of fixed and wireless telecommunications.
The advent of the pandemic seems to have accelerated that inevitable consolidation, as the revenues of telecoms have been hit hard.
Most importantly, the merger between the UK’s second-largest broadband network and its largest mobile operator is set to create a new huge telecommunications provider, which is horizontally-integrated across telecommunications (wireless and fixed) and digital media.
The combination of its operations will not only benefit the companies themselves by leveraging their strengths, but it is also set to benefit consumers, who are set to enjoy more competitive offerings at lower costs.
Furthermore, the combined strength of the two providers is set to push for stronger expansion and lower cost of access to the 5G network, which is also of great importance for consumers.
Bundling increases competition for providers and savings for consumers
The merger of O2 and Virgin Media is set to converge their services into a common bundle. In the new joint company, Virgin Media brings to the table its exclusive fibre broadband network and pay-TV service with access to media content of rivals such as Sky Cinema, BT Sport, along with access to the most popular streaming services, Netflix and Amazon Prime. O2 can offer the UK’s largest mobile network. In this way, Virgin Media and O2 together, can leverage their assets to gain footprint in those services which they currently lack individually against competition.
Most importantly, this horizontal integration is set to lead to a more competitive bundle offering, potentially profitable for consumers, promoting competition with BT, which is currently the only player with such a high horizontal integration. For example, Virgin Media subscribers may have a discount or extra benefits on O2 services, and vice versa, similar to what EE offers to BT subscribers (free months of subscription and zero-rated data free to BT Sport).
O2-Virgin Media 5G network promises greater competition and greater access
O2 and Virgin are planning to leverage their merger on the 5G field. Through their combined financial muscle, they have announced an investment plan of GBP10bn ($12.8bn) for the expansion of 5G and fibre broadband networks over the next five years.
This is great news for consumers, as a greater number of 5G providers is set to increase the coverage and quality of the 5G network and reduce the costs of access to it. At present, the widest 5G coverage comes at non-attractive prices for consumers – higher than those of fibre broadband at similar speeds – while coverage is not available from all providers in all areas of major cities as claimed.