Vodafone, Virgin Media O2 announce new network sharing deal

Vodafone and Virgin Media O2 said the new agreement includes plans for the latter to purchase spectrum at market value from the entity resulting as a result of the merger between Vodafone and Three UK

Vodafone UK and Virgin Media O2 have agreed to extend and enhance their existing mobile network sharing agreement in the U.K. with the aim of bolstering mobile coverage and offering improved services for customers.

The telcos said that many elements of the new agreement expand on the existing arrangement between Vodafone UK and Virgin Media O2 and are independent of the outcome of the proposed merger between Vodafone UK and Three UK. However, subject to completion of the merger, the operators have agreed that Virgin Media O2 will acquire spectrum from the newly created entity, establishing three scaled mobile network operators each with better alignment of spectrum holding.

Through a combination of the merged entity’s commitment to invest £11 billion ($14 billion) in its network over the next decade and Virgin Media O2’s £2 billion annual investment in its networks and services, the agreement will ensure quality mobile connectivity and a better competition, the pair said.

The new agreement will ensure that the virtual operators will have access to a choice of three scaled wholesale competitors, they added.

Ahmed Essam, CEO of European Markets at Vodafone said: “With this agreement and our merger with Three, we will transform the mobile experience for over 50 million customers in the U.K. for the long-term, providing significant network improvements including more choice, better quality and greater coverage across the country.”

“These benefits extend to both retail and wholesale MVNO customers. The proposed merger, together with this agreement, will boost competition by establishing a strong third player in the U.K. mobile market and will improve the balance of spectrum holdings, leveling the playing field between the UK’s mobile operators,” he added.

Lutz Schüler, CEO of Virgin Media O2 said: “We are extending and bolstering elements of our existing network sharing arrangement, while also ensuring there is a robust, balanced and functional structure in place for the long-term should Vodafone and Three’s proposed merger gain consent. 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.”

The telcos noted that the new agreement includes plans for Virgin Media O2 to purchase spectrum at market value from the merged entity, increasing their current holding, adding that the agreement reduces the current imbalances in spectrum holding between the U.K.’s mobile network operators. 

Vodafone and Three UK had recently said that the recent decision by the U.K.’s Competition and Markets Authority (CMA) to carry out a new in-depth review of their proposed merger was in line with the expected timeframe for completion of the transaction.

Last year, Vodafone UK, which is owned by Vodafone Group and Three UK, owned by CK Hutchison Holdings, had announced a new joint venture agreement that would bring their operations under a single network provider. Under the terms of the proposed merger, Vodafone will own 51% of the new entity while Hutchison Group will own 49%.

The CMA recently highlighted that it has concerns that the deal could lead to mobile customers facing higher prices and reduced quality.

The CMA launched the initial phase of an antitrust investigation in January after the entity was notified by the two carriers about the proposed merger. This initial review is designed to identify whether the deal may lead to a “substantial lessening of competition” and therefore requires an in-depth, phase 2 investigation, which had been already launched by the regulator.