Vodafone UK and Virgin Media O2 have announced a landmark agreement to extend and enhance their mobile network sharing arrangement for over a decade.

The agreement, which builds upon the existing partnership between the two telecom giants, is largely independent of the proposed merger between Vodafone UK and Three UK. However, should the merger receive regulatory approval, the deal includes provisions for Virgin Media O2 to acquire spectrum from the newly formed entity, dubbed MergeCo.

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 UK for the long-term, providing significant network improvements including more choice, better quality, and greater coverage across the country.”

Essam believes the deals will foster a more competitive mobile landscape in the UK.

“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 UK mobile market and will improve the balance of spectrum holdings, levelling the playing field between the UK’s mobile operators,” according to Essam.

Virgin Media O2’s CEO, Lutz Schüler, echoed this sentiment, stating, “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.”

Schüler claims the agreement also addresses concerns raised by the Competition and Markets Authority (CMA) regarding the proposed Vodafone-Three merger.

“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,” Schüler noted.

A key aspect of the deal involves substantial investments in network infrastructure. MergeCo has committed to investing £11 billion in its network over the next decade, subject to CMA approval. Meanwhile, Virgin Media O2 plans to maintain its £2 billion annual investment in networks and services.

These investments are expected to have far-reaching effects beyond the companies’ direct customers. The agreement aims to benefit the broader mobile ecosystem, including Mobile Virtual Network Operators (MVNOs) that rely on wholesale partnerships to deliver services to millions of UK consumers.

Massimo Fatato, Head of Networks at NTT DATA UK&I, commented:

“The Vodafone and Virgin Media O2 agreement will be welcome news to MVNOs grappling with spiralling costs and tougher competition. This partnership – along with MergeCo and VMO2’s multi-billion pound investment in networks and services – will demonstrate how long-term collaborations can provide much-needed stability for operators to open up new streams of revenue, while continuing on the path of improving customer experience with a more granular, optimised and efficient network coverage. 

This partnership ensures that virtual operators will have access to three high-quality, scaled wholesale competitors. This is crucial for maintaining a thriving MVNO segment in the UK, enabling these businesses to innovate on a stable foundation and offer new mobile services to millions of consumers nationwide.

As the industry evolves, collaborative approaches, coupled with strategic financial management such as full stack FinOps, will be essential for telcos to meet growing consumer demands and navigate the challenges of an increasingly complex and competitive market.”

The deal also includes plans for Virgin Media O2 to purchase spectrum at market value from MergeCo, should the Vodafone-Three merger proceed. This reallocation of spectrum is designed to reduce current imbalances in spectrum holdings among UK mobile operators, potentially enhancing competition and improving service quality across the board.

See also: Dutch 5G auction: KPN, Odido, and VodafoneZiggo secure crucial spectrum

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