Virgin Media O2 announces plan to spin out cable and fibre network

Virgin Media O2 together with its shareholders, Liberty Global and Telefónica, have initiated plans to create a distinct national fixed network company (NetCo) that will underpin full fibre take up and roll out; provide new financing optionality and a platform for potential altnet consolidation opportunities; and establish the biggest dedicated fixed network challenger in the country, offering clear wholesale choice at scale for other providers as a major alternative to BT’s Openreach.

The entity, which will be a fully consolidated subsidiary of Virgin Media O2 and have a neutral impact on the company’s leverage and credit structure, will comprise of the operator’s cable and fibre network assets covering 16.2 million premises across the UK today, with all upgraded to full fibre in the coming years.

Aligned with Virgin Media O2’s current network strategy, NetCo will focus on completing the company’s ongoing fibre upgrade programme which sees the existing cable network overlayed with full fibre. The structure also gives optionality and flexibility for future in terms of financing and playing a role in potential altnet consolidation alongside pursuing wholesale opportunities as a scaled network alternative.

Virgin Media O2’s consumer and B2B units, and its mobile network, which together make up one of UK’s largest communications providers, will continue to serve millions of customers with a range of connectivity services that will evolve over time. Through a wholesale agreement, NetCo will connect Virgin Media O2’s entire fixed customer base, providing revenue and attractive cash flow from day one of operation.

Virgin Media O2’s mobile assets will not form part of the NetCo, and nexfibre, the independent fibre joint venture between Liberty Global, Telefónica and Infravia, will continue to operate separately focusing on fibre network expansion into greenfield areas.

Once all planned fibre build is completed, the separate NetCo and nexfibre networks will reach a combined total of up to 23 million homes, which will see clear fibre network competition at scale in the UK reaching around 75% of the country. Collectively, Virgin Media O2 and nexfibre have a full fibre footprint of more than 4 million premises today.

The development of this NetCo is underway between teams at Virgin Media O2 and its shareholders Telefónica and Liberty Global. Further details and operational timelines will be announced in due course and subject to any necessary regulatory approvals. In the meantime, fibre upgrade activity continues unchanged at Virgin Media O2.

Lutz Schüler, CEO of Virgin Media O2, said: “This is a logical evolution of our fibre strategy that creates a clear, focused and scaled network entity within the Virgin Media O2 family which underpins our shift to a fully fibre network and reinforces our position as the leading challenger to Openreach in the market. Working closely with our shareholders, this network business will provide a platform for potential altnet consolidation and wholesale opportunities in future, offering widescale network choice for other providers, as well as giving financing optionality. While nothing changes today work is well underway and you’ll hear more from us later in the year.”
BCS Bureau