Broadband, TV and mobile provider VMO2 (Virgin Media and O2) is reportedly seeking outside investors to raise a further £1bn in order to help fund the company’s plan (here) for opening up their existing fixed line network to wholesale via a new business (NetCo), which is expected to be introduced during the first half of 2025.
Just to recap. Virgin Media’s existing gigabit-capable broadband network covers a shade over 16 million UK premises via a mix of different fixed line technologies – primarily Hybrid Fibre Coax (HFC) and some Fibre-to-the-Premises (FTTP) lines (using both Radio Frequency over Glass (RFoG) and XGS-PON). The operator is also working to upgrade their entire HFC network (c.14.3m premises) to FTTP (XGS-PON) by 2028.
As a complement to that, some of VMO2’s parents – Telefónica and Liberty Global (inc. support from InfraVia Capital Partners) – also setup a £4.5bn joint venture called nexfibre in 2022 (here), which aims to deploy an open access full fibre (FTTP) network to reach “up to” 7 million UK homes (starting with 5m by 2026) in areas NOT served by Virgin Media’s own network of 16m+ premises; Virgin Media is currently the only ISP on this network (here). Nexfibre has so far covered 1,277,800 premises (here) and is well on their way to hitting 2m before this time next year.
However, according to a slightly confusing report on Bloomberg from last Friday (via Thinkbroadband), VMO2 is currently seeking to raise “at least” £1bn from “outside investors to help fund its £5 billion newly created network company to challenge incumbent BT Group Plc.” This would, it’s claimed, be done via the sale of a minority stake in the new company.
The confusion in all this stems from the fact that Bloomberg’s language could be taken as referencing either their NetCo or nexfibre, but we’re confident they mean the former. VMO2 is already known to be working on the financials for their NetCo (here) and the idea, as suggested by Bloomberg, of a minority stake (20-40%) in that NetCo business being sold to raise investment to support its development would be in keeping with their plan.
The big challenge will be whether the new NetCo can attract any significant ISP support, at least beyond those already owned by the likes of Liberty Global or Telefónica (i.e. O2, Virgin Media, Giffgaff). Potential ISP partners will be looking to be treated fairly (wholesale agreements), which is always a tricky thing to balance vs the desire by some for exclusivity agreements. The NetCo must at the same time be competitive with the dedicated wholesale platforms from larger providers like CityFibre and the regulated Openreach, while also making what they build as easy to harness as possible.
The opportunities to be had in this space are still potentially very significant, but there’s no escaping the fact that today’s infrastructure market is also fairly diverse and competitive. The NetCo may initially also suffer a bit due to Virgin Media still being in the early phase of their HFC to XGS-PON upgrade, which hasn’t even gone live yet (they’ve only put XGS-PON live via nexfibre, not Virgin’s own network).