Compass Lexecon Advises in Unconditional Clearance of UK Telecoms Merger Liberty Global/Telefónica

In May 2021, the UK CMA cleared the £31.4 billion ($38.45 billion) transaction by which Liberty Global and Telefónica combine their British telecom operations Virgin Media and O2 in a joint venture. The deal brings together the UK’s second-largest broadband network (Virgin Media) with the largest mobile network (O2), creating a player with the assets required to compete in the fixed-mobile converged (FMC) space.

The acquisition was initially notified to the European Commission, but upon request referred to the UK CMA, where it was fast-tracked to a Phase-II investigation. Compass Lexecon provided economic support to Telefónica/O2 throughout the processes of both authorities. The CMA’s investigation focused on theories of input foreclosure related to the provision of leased lines for mobile backhaul and wholesale access to mobile networks.

We assessed horizontal and vertical theories of harm in mobile markets, showing inter alia that the JV would not have the ability or incentive to increase prices in the retail mobile market, or to foreclose access to its network to competing mobile virtual network operators (“MVNOs”). We also assisted in the design and analysis of a survey to understand consumers’ propensity to switch in response to a price increase, particularly in the FMC space.

The team, led by Miguel de la Mano and Thilo Klein, included Scott Holbrook, Cecilia Nardini, and Angelos Stenimachitis with the assistance of Gytautas Karklius, Sara Cosimo, Nathan Viles, Nikki Hui, Pawani Malhotra, and Bo Bourke. We worked closely with Telefónica’s legal advisers of Clifford Chance (led by Jenine Hulsmann and Miguel Odriozola) and Cleary Gottlieb Steen & Hamilton (led by Francisco Enrique González Díaz).