The owners of Virgin Media O2 have agreed to a £2bn takeover of challenger fiber network Netomnia, marking a significant step towards consolidation in the crowded UK broadband market.
Liberty Global and Telefónica, together with InfraVia Capital, will acquire Netomnia, currently the UK’s second largest alternative network provider, through their joint venture Nexfibre.
The deal will expand Nexfibre’s presence to around 8 million households 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.
At this scale it comes close to Openreach, the network arm of BT Group, which has delivered full fiber coverage to just over 21 million locations.
Shares in BT fell 2.5 percent following news of the takeover.
Founded in 2019, Netomnia is one of dozens of “altnets” that have emerged to challenge the dominance of Openreach and Virgin Media O2. However, many smaller fiber optic operators have paused their expansion due to higher borrowing costs and weaker than expected customer adoption.
Nexfibre CEO Rajiv Datta said the enlarged group would provide greater reach to wholesale partners, including Sky, which has recently started using CityFibre’s network alongside Openreach.
The deal saw Virgin Media beat O2 CityFibre, backed by Goldman Sachs, which had previously positioned itself as a natural consolidator in the fragmented sector.
CityFibre chief executive Simon Holden criticized the move, warning it risked creating an “ineffective duopoly” between BT and Virgin Media O2 and called on the Competition and Markets Authority to investigate the overlap.
The acquisition will be funded with equity capital of £850m from InfraVia and £150m from Liberty Global and Telefónica, as well as a £2.7bn credit facility to finance the purchase and further network expansion.
The deal comes as Virgin Media O2 continues to struggle with customer losses, losing 18,000 broadband customers and 165,000 mobile customers in the last quarter.
Separately, Liberty Global has agreed to pay Vodafone €1 billion for its 50 percent stake in Dutch joint venture VodafoneZiggo. Liberty plans to merge VodafoneZiggo with its Belgian unit Telenet and spin off the combined company, Ziggo Group, via an Amsterdam stock exchange listing next year.
The Neomnia acquisition signals that consolidation in the UK fiber market, long anticipated as funding tightens and competition intensifies, is now gaining momentum and potentially reshaping the balance of power in the UK broadband industry.
