UK Gives Provisional Green Light to Merger of O2 and Virgin, Key for Pallete | Companies

Relief for Telefónica in the UK. The British competition authority, the CMA, has given a provisional green light to the merger of O2, the British subsidiary of the Spanish company, with Virgin Media, owned by the American LIberty Global. The operation is valued at 35,800 million and will create a telecommunications giant in the country, which with 46 million lines, between mobile, fixed broadband and television, seeks to threaten the historical leadership of BT. For this reason, the authorization of competition is key.

“A thorough analysis of the evidence gathered during our investigation has shown that the agreement is unlikely to lead to an increase in prices or a reduction in the quality of mobile services, which means that customers should continue to benefit from strong competition.” , has indicated the CMA. The competition authority, in this case the European Commission, has already thwarted a key operation of Telefónica O2, its sale to Hutchison in the spring of 2016.

Like the former, the integration of O2 and Virgin is key to the plans of the Spanish company and its president, José María Álvarez Pallete, in reducing debt. With the operation, teleco foresees a debt reduction of between 6,300 and 6,652 million euros, and an initial payment of 6,500 million euros. At the end of 2020, Telefónica’s debt was around 35,000 million, although the teleco pointed out that, with the pending operations, the merger of O2 and Virgin, and the sales of Movistar Costa Rica and the Telxius towers to American Tower, indebtedness would be around 26,000 million.

The operation was announced in May last year, in the midst of the pandemic, and a few months later the United Kingdom asked Brussels for the operation’s file, in view of its characteristics and the end of the post-Brexit transition process.

The CMA has indicated that its analysis has not focused on possible duplications in the retail markets, without considering whether the operation may reduce competition in the wholesale market, that is, in the rental of services to third-party operators.

Virgin rents lines to operators such as Vodafone or Three to complete its own networks, while O2 rents its network to alternative mobile operators. The CMA feared a price hike in these areas, but has provisionally ruled out this possibility, indicating that customers should continue to benefit from strong competition.

The final approval could take place during the month of May, according to industry sources, who point out that it is highly unlikely that the CMA could change the direction of its decisions. From the outset, Telefónica’s management has demanded approval without conditions, recalling that, in 2015, the United Kingdom gave the green light to a very similar transaction, the purchase of Everything Everywhere by BT, also without setting conditions.

Both partners have worked with that conviction. In fact, already in the second half of 2020, they completed the recapitalization of the joint venture, with the raising of more than 6,100 million euros between credits and bonds. Last week, Telefónica and Liberty announced the management structure of O2 Virgin Media. Thus, Lutz Schüler, from Virgin will be the CEO of the new operator, while Patricia Cobián, financial director of O2, will occupy the same position in the joint venture.

In addition, Liberty Global has accelerated in recent weeks the segregation of Virgin Media’s business in Ireland, which was not part of the agreement with Telefónica.

Telefónica and Liberty have argued that the merger combines the mobile strength of O2, with an ambitious 5G deployment, and the weight of Virgin Media in fixed broadband. One of the promises of both partners is the acceleration of the deployments of the next generation infrastructures, both mobile 5G and fiber. In this case, the Spanish group has highlighted that it will contribute its experience in the deployment in markets such as Spain and Brazil.

Telefónica shares started the session with slight decreases, amid the doubts that surround the markets. In the first minutes of trading, they are left around 0.7%, up to 3.71 euros. Various analysts have agreed that the approval of the merger of O2 and Virgin Media should be a catalyst for the recovery of the matildes.

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Boris demands a fundamental change in the position of the EU or there will be no-deal Brexit

16/10/2020 13:21Updated: 10/16/2020 2:41 PM

Less than three months after the total disconnection of the United Kingdom from the European Union, British ‘premier’ Boris Johnson has once again tightened negotiations with the EU bloc, demanding a “fundamental change” in the European position so that there is a business agreement that limits the financial shock of divorce.

In a televised statement, Johnson said the UK is already preparing for a trade relationship with the EU “more to the Australian”, which means that a pact would not be closed and relations would be governed by the general rules of the World Trade Organization (WTO).

“Judging by the last (community) summit in Brussels […], they want the ability to control our legislative freedom on an ongoing basis, our fishing in a way that is completely unacceptable to an independent country. “With” just ten weeks away “from the end of the transition agreement, Johnson has warned that he must “judge on the possible outcome”, “and prepare [a Reino Unido] for disconnection “. The ‘premier’ also accused the EU of not having negotiated with “seriousness”, given that the summit seems to have ruled out an agreement like the one with Canada, has “concluded that we must prepare for January 1 under arrangements that resemble the Australian.”

Already last month, the British leader put limit on October 15 to reach a commercial agreement, where London resists on key points such as the ‘level playing field’ to maintain the standards of fair competition, controls on goods at the Irish border or the jurisdiction of the European Court of Justice or the question of fishing grounds.

British choreography

Johnson’s statements, especially controversial When the agreement with the Union is still being negotiated and there have been signs of certain transfers, they are part of the choreography of that “crappy” British finale. “Crucially, Johnson has not abandoned the negotiations today. The talks are still continuing. We are not yet in the final political game in which we will see if there is really going to be a Brexit trade deal or not,” said Sebastian Payne, correspondent politician from the Financial Times.

On the community side, the president of the European Commission, Ursula von der Leyen, has insisted that everything continues as planned. “The EU continues to work for an agreement, but not at any price. As planned, our negotiating team will go to London next week to intensify those negotiations.”

The three splinters

The ‘tory’ leader wanted at least “a base” to be reached this week and then “the pending fringes” to be closed. The problem is that the pending fringes have been there for months and neither party is willing to make concessions.

The most contentious points have always been three. The first of them, the supervision of the future agreement, where London categorically refuses that the arbitrator is later the European Court of Justice.

The second, the so-called “level playing field”, which amounts to fair competition. Brussels does not want the UK to now become a new Singapore on the other side of the English Channel. Although it is true that the United Kingdom currently spends 0.4% of its GDP on state aid, compared to the average of 0.8% in the EU (in the case of France it is 0.8% and in Germany, 1.3%).

Third is the question of fishing. It is a sector that represents only the 0.12% of UK GDP, which is almost 60 times less than that of financial services. While the British Government has accepted that access to EU markets will be limited for British City finance companies after Brexit, fishing remains a battlefield. The great thorn, after all, that could end up choking on the negotiations ruining everything.

The truth is that, in the event that the agreement was not finally reached before December, nothing prevents both parties from resuming a dialogue in the future. Although, in the meantime, relations between the United Kingdom and the EU would be governed solely under the guidelines of the World Trade Organization, with the chaos of quotas and tariffs that this would imply from January.

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