Vodafone and Virgin Media O2 have struck a new network agreement as the companies look to reassure regulators of competition concerns in the telecoms sector.
The companies announced on Wednesday that they had agreed to “extend and enhance” their existing agreement, which has been in place for more than a decade.
Subject to the completion of a proposed mega-merger between Vodafone and Three’s UK units, the deal would see Virgin Media O2 purchase spectrum from the combined business – which the firms said would create “three high-quality, scaled wholesale competitors, further supporting an already thriving mobile virtual network operator segment in the UK”.
The companies said the bulk of the deal is not subject to the merger going through. The competition regulator is currently investigating a potential tie-up between Vodafone and Three over concerns it would likely lead to higher prices for customers, poorer network quality, and fewer incentives to invest.
One of the firms’ key arguments in favour of the merger is it’s essential for rolling out nationwide 5G standalone networks, with a pledge to invest £11bn in the combined business’ network over the next decade.
Nearly all of the UK’s 5G is built on top of existing 4G infrastructure. The government is aiming for all populated areas in the UK to have standalone 5G coverage by 2030, which would carry more data at faster speeds, although Ofcom said in December that deployment was still “at an early stage”.
Vodafone and Virgin Media O2 said on Wednesday that their new agreement would “ensure quality mobile connectivity, choice and competition is enhanced”.
“The proposed merger, together with this agreement, will boost competition by establishing a strong third player in the UK mobile market and will improve the balance of spectrum holdings, levelling the playing field between the UK’s mobile operators,” said Ahmed Essam, chief executive of European Markets at Vodafone.
Lutz Schüler, CEO of Virgin Media O2, added: “We believe that this new agreement addresses the issues we have voiced and the CMA outlined in its initial decision, and will now continue our engagement with the regulator in this spirit.”