UK's Vodafone and Virgin Media O2 say spectrum deal will boost competition

LONDON (Reuters) - Britain's Vodafone and Virgin Media O2 have reached a new network sharing agreement in the UK including a plan to shift spectrum which could help Vodafone win regulatory approval for its tie-up with mobile operator Three.

A planned $19 billion merger between Vodafone's UK operation and Hutchison's Three UK unit is the subject of an in-depth probe by the UK's Competition and Markets Authority (CMA).

Under Vodafone and Virgin Media O2's new long-term deal, the enlarged Vodafone-Three entity would sell spectrum to Virgin Media O2, which the companies said would improve mobile connectivity, choice and competition for customers.

That could help address the regulator's concerns about a merger which is set to reduce the number of mobile networks in Britain to three from four.

"We believe that this new agreement addresses the issues we have voiced and the CMA outlined in its initial decision," Virgin Media O2 CEO Lutz Schuler said in a statement.

Vodafone said the network-sharing deal would allow customers of Virgin Media O2 to benefit from the 11 billion pound investment plan in 5G networks that it has pledged should its merger with Three win approval.

"The proposed merger, together with this agreement, will boost competition by establishing a strong third player in the UK mobile market," said Ahmed Essam, Vodafone's CEO of European Markets.

(Reporting by Sarah Young; editing by Kate Holton and Jason Neely)