Virgin Media O2 CEO Lutz Schüler today argued that the acquisition of Netomnia by Nexfibre, a joint venture between VMO2’s owners and Infravia, represents a crossroads for the industry, saying that blocking it would harm future investment in the sector.
The deal, which was first announced in February, is currently being examined by the Competition and Markets Authority (CMA). It would see Nexfibre acquire Substantial Group, which owns wholesaler Netomnia and smaller retail players like Brsk and YouFibre, for £2 billion (US$2.7 billion).
Nexfibre, it should be noted, is a joint venture between Telefónica and Liberty Global, which own 25% each, and Infravia with 50%. VMO2 is a 50/50 joint venture between Telefónica and Liberty Global, following a merger in 2021.
Already, things are not right with the UK fiber market, Schüler said, noting consolidation has been talked about for years and the current situation isn’t economically viable. Funding has become difficult to come by, with some investors already taking action.
“We see companies like Airband and Toob, investors have handed over the customers to lenders. G.Network was acquired by a debt specialist and turned into administration, and Gigaclear has asked their debt holders to write off 40% to get to the next round of investment,” he said, recounting recent altnet struggles.
Notably, G.Network has since emerged from administration following restructuring and continues to operate, while Airband was, its administrators revealed this week, sold to Voneus as the only bidder for £4.6 million ($6.2 million). As for Toob, the company was recently denied any further funding by its investor INPP, according to media reports.
“You see already that no new investors [are] coming into this country and investing in fiber, and without this approval of the deal, I think it will get even harder. I would bet no fiber is going to be built anymore in this country,” Schüler argued.
Challenge to Openreach
Approving the deal would, meanwhile, allow VMO2 to become a real challenger to Openreach, according to Schüler, who stated his company is the only one in a position to do so. Nexfibre previously said the deal would unlock £3.5 billion ($4.7 billion) in new investment, a statement that was repeated by Schüler today.
Asked by the session moderator, Enders Analysis’ managing director for telecoms, Karen Egan, whether CityFibre can’t be considered to have the scale needed, he was unconvinced. While stating CityFibre’s network footprint reaches roughly 4.5 million homes, “we would, with that deal, offer three times of that,” Schüler said.
CityFibre, for its part, has made no secret of its scorn for the proposed transaction. Its CEO Simon Holden was vocal in calling on the CMA to probe the deal, pointing to the overlap between Nexfibre and Netomnia’s networks. At one point it was about 2.5 million out of 3 million properties covered by Netomnia.
It may be some time before a final decision is reached. The deal was referred for an in-depth “Phase 2” probe in July by the CMA, which has set a statutory deadline for December.
