What will the proposed merger between Virgin and O2 mean for customers?

With the news headlines dominated by the economic damage the ongoing lockdown is causing, another significant financial story may have passed you by.

In normal times, Virgin Media and O2’s proposed £31 billion merger into one of Europe’s biggest telecom firms would have been front-page news.

However, these are not normal times. Plus, the deal may yet be spiked on the rocks of regulatory approval.

But what might this proposed merger between Virgin and O2 mean for consumers?

A merger of equals?

History is liberally sprinkled with mergers which didn’t live up to the billing, or never actually took place.

When British Satellite Broadcasting and Sky ‘merged’ in 1990, the resulting business adopted Sky’s syndicated content, channel titles, hardware and even its name.

Last year, the CMA blocked a proposed merger between Asda and Sainsbury, arguing consumers would lose out as a result of reduced competition in the grocery sector.

However, the proposed merger between Virgin and O2 appears to sidestep both these pitfalls.

The two brands are more equal in size, representing distinct market segments. Virgin has no mobile network, and O2 has no fixed network.

Indeed, the only significant crossover involves smartphone contracts.

O2 has its own telecommunications infrastructure, with 35 million customers spread across O2 and companies like Tesco Mobile which piggyback on its hardware.

Conversely, Virgin has to pay Vodafone so its quad play customers can make and receive mobile calls.

O2 has 450 retail stores, giving Virgin an instant foothold on the high street. Arch-rival BT achieved a similar landgrab when it acquired EE in 2016.

Meanwhile, O2 offers mobile broadband but no home broadband services – an area Virgin excels in, with its proprietary network of full fibre cabling also serving up TV and landlines.

So will consumers benefit?

On paper, a firm combining O2’s mobile infrastructure with Virgin’s full fibre broadband ought to appeal to consumers.

And it’s hard to see a significant loss of competition from the proposed merger between Virgin and O2.

We’d still have a choice between four mobile operators – O2/Virgin, BT/EE, Vodafone and Three.

Virgin’s broadband and TV services would still be challenged by other quad-play brands including Sky and BT.

O2 and Virgin Media are both owned by foreign companies, with no residual loyalty to the UK market.

Indeed, O2 would have been sold to Three’s parent company CK Hutchison in 2015, had the European Commission not blocked it due to competition concerns.

Virgin and O2 claim they could save £6 billion and invest £10 billion into new services in the first five years after merging.

That could benefit consumers of both brands, neither of which have the best reputation for customer service.

It remains to be seen whether the Competition and Markets Authority gives this proposal the green light, and whether the O2/Virgin alliance would be popular with the public.

At this early stage, though, the signs look good.