"After looking closely at the deal, we are reassured that competition amongst mobile communications providers will remain strong and it is therefore unlikely that the merger would lead to higher prices or lower quality services," said Martin Coleman of the Competition and Markets Authority.
Virgin owner Liberty Global and Spain's Telefonica agreed the merger a year ago, creating a powerhouse in broadband and mobile to take on market leader BT.
It is expected to close by June 1, the companies said.
Liberty Global CEO Mike Fries and his Telefonica counterpart José Maria Alvarez-Pallete said: "This is a watershed moment in the history of telecommunications in the UK as we are now cleared to bring real choice where it hasn't existed before, while investing in fibre and 5G that the UK needs to thrive."
The deal values O2 at 12.7 billion pounds and Virgin Media at 18.7 billion pounds, giving a combined value of 31.4 billion pounds ($44.36 billion) including debt.
The combined companies will have 11 billion pounds of annual revenue, the two owners said.
($1 = 0.7079 pounds)
(Reporting by Pushkala Aripaka in Bengaluru and Paul Sandle in London; Editing by Subhranshu Sahu and Carmel Crimmins)
