The power of two in most people’s minds is a positive move; to pull together and provide the best of both worlds, improving processes and sharing resources. In the world of business, this is the main goal when two companies merge, providing the opportunity for overall improvements to be had and a shared outlook. But does this always work in favour for those companies’ consumers?With the news earlier this month that Virgin Media and O2 are discussing a merger to “reshape” the telecoms industry, what will be the wider impact on their services and the consumer? Here, we look at some of the most recent high-profile mergers and what it means for consumers.
Virgin Media & O2
The two global companies were reported on 1stMay to be in talks to merge O2’s 34 million customers with Virgin Media’s 5.3 million broadband, TV and mobile users. John Malone’s Liberty Gold, that owns Virgin Media and a 10% stake in ITV, is currently in talks with Telefonica to combine their UK assets and potentially provide a major challenger to BT and Sky. The deal is estimated to be worth £31.4 billion, based on O2’s valuation of £12.7 billion and Virgin Media’s worth of £18.7 billion, planning to complete in 2021.Previously, O2 was nearly taken over by Three in 2015 but the merger was blocked by the European Commission on competition grounds, citing the takeover would have increased prices and reduced the choice available for consumers.So what has changed with the Virgin Media and O2 deal?
As well as a reduction in costs overall for the companies, the 50-50 venture will look to create a stronger fixed and mobile competitor in the UK for the benefit of consumers, businesses, and the public sector alike. This is because it would bring together O2’s 5G mobile deployment and Virgin Media’s giga-ready network, helping to propel the technology forwards. According to Business Wire, the newly formed platform will put customers first and have the necessary scale to innovate the market due to £10 billion being invested into the UK over 5 years.This all sounds positive if it turns out to be true, but what about the costs to the consumer? It is believed that the £500 million a year potential savings from the deal may not necessarily be passed onto consumers, with instead the focus being on reinvestment in the technology for 5G and broadband infrastructure. It’s too early to tell how this merger will impact both companies existing customers and potential new ones, but it will mean one less company to choose from. Consumer group Which? have also called on the Competition and Markets Authority (CMA) to investigate the merger saying it could have a “significant impact on consumers”.
BT & EE
In January 2016, mobile network operator EE was bought by BT and since April 2018 has been part of BT’s consumer division which consists of BT, EE and Plusnet. The deal was worth £12.5 billion and kept both companies separate, with the aim to completely merge both companies within 4 years, according to EE Chief Executive Marc Allera. Now in 2020, both companies are still running separately, so what’s happened? After being given the green light by the CMA 4 years ago, it was dismissed that the 35 million customers the merger would effect would result in higher bills, saying that in fact, bills could decrease thanks to newly created bundle deals putting services that were separate together. As of December 2017, BT holds the largest share of the market with 28% of consumers which includes EE. However no new details have emerged about when EE will completely merge into BT and in early May, BT saw their share value fall 12% to an 11-year low, leading to them suspending their dividend to make savings.
Just Eat & Takeaway.com
Away from telecommunications, another recent merger between online food delivery service Just Eat and Takeaway.com in April this year raised concerns about the impact on consumers. The deal is worth £6.2 billion which the CMA has cleared to go ahead citing no competition concerns. A similar food app merger has also taken place between Amazon and Deliveroo that again raised concerns of a lack of competition and potential price hikes or lowering of food standards. The deal, that has seen Amazon purchase a 16% stake in Deliveroo at £575 million, was agreed by the CMA in April after Deliveroo argued they have seen a significant loss in revenue since lockdown measures occurred in March, closing many restaurants.
According to Gov.UK the deal between Just East and Takeaway.com was investigated due to the small number of companies that offer delivery between restaurants and customers and argued whether Takeaway.com, that operates in 11 countries including Germany and the Netherlands, would have entered the UK market alone to help provide better value for money to UK customers. However, this was dismissed as unlikely meaning the merger could go ahead. With this merger only confirmed at the end of April, it remains to be seen what the impact could be for customers on how much they will pay to use the service going forward.
What Can Consumers Do?
It can be easy for consumers to feel left-out and helpless if a company they use for products and services decides to merge with another. The good news is you still have the power to shop around and find the best deal for you, rather than have to accept any potential new price hikes or service changes that you didn’t originally agree to. In the case of both mergers involving Virgin Media with O2, and BT with EE, customers have so far not had to take any action, with it expected to see more offers providing converged services to appear, the details of which have not been revealed. According to telecoms analyst Kester Mann of CCS Insight, customers may need to have a “new mind-set” as currently packaged and bundled services aren’t as popular in the UK as in other European markets.
For those customers who are unsure of what the future may bring with a merger, there are a few things you can do. Try searching through comparison sites to see all similar deals together, or use popular cashback sites or apps like TopCashback, to see if there are any products or services that have an incentive to buy. This can highlight better deals in places you may not have come across before. If it’s a service like gas and electric, insurance products or other subscriptions, check the terms and conditions to ensure if switching to other deals come with any penalties mid contract, especially if you are currently on a fixed-term deal.If you are coming to the end of a contract, shop around rather than just renewing straight away so you don’t miss out on potentially better offers. Websites like Uswitch are particularly useful when looking to change providers.
Also,when searching online, make sure to regularly clear the cache and cookies through your browser settings, as personalised ads will promote items you have previously searched for to entice you back to purchase rather than look elsewhere. Using an ‘incognito’ or private browsing option can also avoid these types of tracking ads.There are many ways the power is still with the consumer to get a better deal and it involves considering all options first.
In the Interest of Fairness
The purpose of the Competition and Markets Authority (CMA) is to uphold and promote competition for the benefit of consumers within and outside of the UK. Its core belief is that competition is good for businesses and consumers alike, which is why it has a vested interest in ensuring any potential high-profile mergers will not impact the general public. There are situations recently where mergers have been blocked. One in particular involved fashion retailer JD Sports purchase of competitor Footasylum. Earlier this month, the CMA cited that the purchaser would leave consumers worse off meaning fewer discounts or receiving lower quality customer service. The deal would have been worth £90 million.
There are two sides to all mergers no matter the industry involved, one that benefits the businesses involved and the other being the consumer impact. The CMA themselves have launched a campaign highlighting anti-competitive behaviours, citing businesses that collude with their competitors by inflating prices and reducing choice are breaking the law in the process.The impact on a consumer’s personal finances can be huge, as after all no-one wants to be paying out more for a service or product then they should be.
Competition should be healthy in any industry to help drive down costs to the consumer. In the finance industry in particular, the Financial Conduct Authority (FCA) regulates financial firms such as Wizzcash to ensure the markets remain honest and fair and the consumer is treated fairly. As an authorised lender, we work to ensure products like our same day loans are in line with guidelines to ensure you are protected, so if you ever do need them for an emergency, you can trust you are getting a fair choice.
For more information on how our lending products work and other related articles, please see the links below:
- Payday Loans FCA Regulations
- Financial Regulations & Payday Loans
- Comparison Websites – Are They Helpful For Your Financial Decisions?