Virgin Media owners of O2 have agreed the £2bn acquisition of challenger fiber network Netomania, marking a significant step towards consolidation in the UK's crowded broadband market.
Liberty Global and Telefónica, through their NexFiber joint venture with Infravia Capital, will acquire Netomnia, currently the UK's second largest alternative network provider.
The deal will expand NexFiber's reach to approximately 8 million homes by the end of next year. Combined with Virgin Media O2's existing infrastructure, the expanded network will cover approximately 20 million premises and serve approximately 6.2 million customers.
This scale brings it close to BT Group's networks arm, Openreach, which has passed more than 21 million premises with full fibre.
BT shares fell 2.5 percent following news of the acquisition.
Founded in 2019, Netomnia is one of dozens of “altnets” that emerged to challenge the dominance of Openreach and Virgin Media O2. However, many smaller fiber operators have halted expansion due to high borrowing costs and weaker than expected customer participation.
NexFibre chief executive Rajeev Dutta said the larger group would offer scale to wholesale partners, including Sky, which recently started using CityFibre's network in addition to Openreach.
Virgin Media O2 beat out Goldman Sachs-backed CityFibre in the transaction, which had previously positioned itself as a natural consolidator of the fragmented sector.
CityFibre chief executive Simon Holden criticized the move, warning that it risked creating an “ineffective duopoly” again between BT and Virgin Media O2 and called on the Competition and Markets Authority to investigate the overlap.
The acquisition will be financed with £850m of equity from Infravia and £150m from Liberty Global and Telefónica, as well as a £2.7bn debt facility for both the purchase and further network expansion.
The deal comes as Virgin Media O2 faces customer losses, losing 18,000 broadband customers and 165,000 mobile customers in the latest quarter.
Separately, Liberty Global has agreed to pay Vodafone €1bn for its 50 per cent stake in Dutch joint venture VodafoneZiggo. Liberty plans to merge VodafoneZiggo with its Belgian unit Telenet and spin off the combined entity, Ziggo Group, through a listing in Amsterdam next year.
The Netomnia acquisition signals that consolidation in the UK fiber market, which has long been expected as funding has tightened and competition has intensified, is now gathering pace, potentially reshaping the balance of power in the UK broadband industry.
Amy Ingham
Amy is a newly qualified journalist specializing in business journalism with responsibility for news content at Business Matters, the UK's largest print and online source of current business news.