Vodafone, Virgin Media O2 Extend Network Sharing Deal

Current network sharing deal between Vodafone and Virgin Media O2 extended to mid 2030s, including some spectrum sale

Vodafone and Virgin Media O2 have “significantly extended” an existing networking sharing deal, and also added a spectrum sale in light of a UK competition inquiry into the merger between Vodafone and Three UK.

On Wednesday Vodafone and Virgin Media O2 announced the extension to a existing mobile network sharing agreement for more than a decade, saying the deal is “bolstering quality mobile coverage across the country and delivering improved services for customers.”

Vodafone and O2 have a long history together. It was back in 2012 when Vodafone and Telefonica UK (then owner of O2) had agreed to a network-sharing deal to accelerate the rollout of 4G in Great Britain.

Then five years ago in July 2019 Vodafone and O2 finalised a 5G network agreement so that both operators could share sites and 5G active equipment, such as radio antennas.

Mobile changes

Since that time, more change has occurred in the competitive UK mobile sector.

In 2020 for example Virgin Media (owned by Liberty Global) and mobile operator O2 (owned by Telefonica) agreed they would form a 50:50 joint venture.

The deal was finalised in 2021 after regulatory clearance, and the resulting Virgin Media O2 is now jointly owned by Liberty Global and Telefonica.

Vodafone was also been subject change in recent years, selling off a number of key European operations.

Then in June 2023 it was announced that Vodafone UK and the Chinese owner of Three UK (CK Hutchison) had agreed to the long touted merger of their respective UK mobile operations (with Vodafone UK holding a 51 percent stake).

That deal will combine the companies’ telecommunications operations under one single network provider, for a total of 27 million mobile customers, instantly making the combined entity the biggest mobile operator in the UK.

Regulatory investigation

But the deal triggered regulatory concerns.

In January this year, the Competition and Markets Authority (CMA) began a Phase One investigation of Vodafone UK’s merger with Three UK.

In March 2024 the CMA concluded its phase one investigation, and said it had concerns the merger could lead to mobile customers facing higher prices and reduced quality.

An in-depth Phase 2 investigation of the proposed merger began in early April 2024.

Network-sharing, spectrum

Now Vodafone UK and Virgin Media O2 have agreed to extend and enhance their existing mobile network sharing agreement for more than a decade – independent of the Vodafone UK and Three UK merger outcome.

However, subject to completion of the merger, the operators have agreed that Virgin Media O2 will acquire spectrum from the newly created MergeCo, establishing three scaled mobile network operators each with better alignment of spectrum holding.

Vodafone offloading some its 5G spectrum to Virgin Media O2 could help to address the CMA’s concerns about the Vodafone, Three UK merger.

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

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

“This new agreement with Vodafone ensures that quality mobile network choice, performance, coverage and competition is enhanced to the benefit of millions of consumers, businesses and our mobile operator partners across the country,” added Lutz Schüler, CEO of Virgin Media O2.

“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,” said Schüler. “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.