By Paul Sandle and Clara-Laeila Laudette
LONDON/MADRID (Reuters) -Britain's competition regulator cleared a $44 billion merger between broadband company Virgin Media and Telefonica (NYSE:TEF)'s UK mobile network O2 on Thursday, after a months-long review.
Virgin owner Liberty Global (NASDAQ:LBTYA) and Spain's Telefonica, who agreed a year ago to forge a broadband and mobile powerhouse to challenge market leader BT, hailed the decision as "a watershed moment in the history of telecommunications in the UK".
"We are reassured that competition amongst mobile communications providers will remain strong and it is therefore unlikely that the merger would lead to higher prices or lower quality services," Martin Coleman of Britain's Competition and Markets Authority (CMA) said.
The companies said the deal, which values O2 at 12.7 billion pounds and Virgin Media at 18.7 billion pounds to give the new group a combined value of 31.4 billion pounds ($44.4 billion) including debt, is expected to close by June 1.
"We are now cleared to bring real choice where it hasn't existed before, while investing in fibre and 5G that the UK needs to thrive," Liberty Global CEO Mike Fries and his Telefonica counterpart José Maria Alvarez-Pallete said in a joint statement following the CMA approval.
The 50:50 joint venture, which will be led by Virgin Media boss Lutz Schüler, will have 11 billion pounds of annual revenue, the two owners said.
"For Telefonica, that's a big deal done," one financial source told Reuters. "They're buying Oi in Brazil and need to finalise that, but this would mean consolidating major presence in the UK, Germany, Brazil and Spain."
The CMA had been concerned about the possible impact of the merger on the British mobile market given that both companies sold wholesale services to other operators.
However it gave the deal provisional approval last month after concluding that other players offering rival services, such as BT and Vodafone (NASDAQ:VOD), would maintain competition.
Telefonica has been selling assets to cut debt, which stood at 35.8 billion euros in this year's first quarter, and also fund an upgrade to next-generation 5G networks while, like European rivals, it tackles competition and the COVID-19 crisis.
($1 = 0.7079 pounds)