Thursday 25 February 2021 7:50 am

O2’s £31bn Virgin Media merger ‘will help UK pandemic recovery’, says CEO

O2’s proposed £31bn tie-up with Virgin Media will accelerate investment in telecoms infrastructure and bolster the UK’s post-pandemic recovery, the mobile network’s boss has said.

The mega-merger, agreed last year by O2 owner Telefonica and Virgin Media parent Liberty Global, is facing an in-depth probe by regulators amid concerns it could harm competition.

Read more: O2 hit with £10.5m Ofcom fine after overcharging customers

But O2 chief executive Mark Evans today insisted the deal was “pro-competitive”, adding that it would have positive implications for the wider market.

“Other competitors now will up their game, they will accelerate more and they will invest further in digital infrastructure which enables the UK economy to grow even faster and further,” he told City A.M.

“So it isn’t just about what it would do for customers — which is as much choice, better connectivity and enhanced value — I think it will be a real stimulus for the sector.”

Evans, who has led the mobile operator since 2016, said this was even more important in light of the pandemic, arguing that the UK economy would have been “decimated” without telecoms services.

“I think the pandemic if anything has emphasised the criticality of what we do and what we provide for other sectors. So if the CMA [Competition and Markets Authority] wants to take that into consideration, I’m sure they will.”

The deal, which will combine Britain’s biggest mobile network with its second-largest broadband company, reflects efforts by network providers to win customers in an increasingly cut-throat market by bringing together mobile and fixed-line services.

A number of rivals have raised concerns to the competition watchdog that the merger could push up the price mobile operators have to pay to lease network infrastructure.

But Evans shrugged off the complaints, pointing to regulatory clearance of similar previous deals, including BT’s £12.5bn takeover of EE in 2016.

“What has been proven to be the case across Europe is that this [convergence] creates more choice, better connectivity and improved value for customers.”

Read more: Mobile rivals raise competition concerns over £31bn O2-Virgin merger

O2 profit grows despite Covid revenue hit

The comments came as O2 reported continued growth in profitability and customer numbers, despite a hit to revenue caused by the pandemic.

O2, which is the UK’s largest mobile network, reported a 4.8 per cent increase in customer numbers to 36.2m. Its connections include customers using its network through operators such as Giffgaff, Sky and Tesco Mobile.

Operating income before depreciation and amortisation ticked up one per cent year on year to 30.8 per cent.

However, revenue dropped 4.4 per cent to just under £6bn due to a lockdown-related hit to services such as roaming, as well as the closure of its brick-and-mortar stores.

O2 pumped £728m into capital expenditure last year as it spent money upgrading its existing network and continuing the rollout of 5G.

The company has now launched the new high-speed network in 150 towns and cities across the UK.

Read more: EE to extend 4G coverage in rural not-spot crackdown

O2 also said from next month it will allow customers to buy tech products including games consoles, headphones and smart watches without committing to an airtime contract.

“We continue to drive value back to customers, saving them £168m in the past year alone through flexible plans that ensure that they always get the best deal. By focusing on value and flexibility, we have grown our customer base to 36.2million, achieving industry leading loyalty and customer satisfaction ratings,” said boss Evans.

Evans told City A.M. that high street retail remained an important part of O2’s business, though the company had no plans to significantly increase or decrease its store portfolio.

A while he said roaming revenue would “bounce back” this year thanks to an easing of lockdown measure, a return to pre-Covid levels was not expected until at least 2022.