The UK’s Competition and Markets Authority (CMA) has signaled it may block a proposed £2 billion acquisition of broadband operator Netomnia by Nexfibre, a joint venture backed by Virgin Media O2’s shareholders Liberty Global and Telefónica, along with private equity firm InfraVia Capital. The deal, announced in February, would mark a significant consolidation in the fragmented UK broadband sector but has raised competition concerns.

The CMA expressed preliminary concerns that the acquisition could substantially reduce competition in the wholesale fixed broadband market, particularly due to overlapping network infrastructure between Nexfibre and Netomnia. This could adversely affect pricing for consumers, especially in the north of England. The authority’s assessment follows an in-depth investigation and is provisional, leaving room for further review before a final decision.

Nexfibre has positioned the deal as a means to expand fiber broadband coverage to approximately eight million homes, aiming to better compete with market leader BT’s Openreach division. However, the CMA disagreed, suggesting that Nexfibre’s planned network expansion was already underway independently and that the acquisition was not necessary to achieve these objectives.

The potential blockage represents a setback for consolidation efforts in the UK broadband market, which has attracted over £31 billion in investments from alternative network providers seeking to challenge established operators like BT. Despite this inflow of capital, the sector faces financial strain: Enders Analysis reported that many providers are burdened with high debt levels, contributing to a collective loss of £1.5 billion in 2024 and weaker-than-expected consumer subscription growth.

Netomnia’s previous parent company, Substantia Group, agreed to the sale to Nexfibre earlier this year. Other competitors, such as Goldman Sachs-backed CityFibre, had also pursued Netomnia but exited the bidding process. CityFibre has urged the CMA to block the deal, citing the risks of reduced competition, and indicated it might submit a rival offer should the current transaction fail.

Responding to the CMA’s interim findings, Nexfibre contested the watchdog’s analysis, stating that the report “does not reflect the commercial and competitive reality of Britain’s fibre market.” CityFibre emphasized the importance of the CMA’s intervention to prevent market harm but declined to comment on any potential future bids.

The CMA’s ongoing review highlights the delicate balance between encouraging network expansion and maintaining competitive market dynamics in the evolving UK broadband sector.