Virgin Media O2’s owners, Liberty Global and Telefónica, have expressed frustration after the UK’s Competition & Markets Authority (CMA) indicated it plans to block a £2 billion acquisition aimed at consolidating alternative network providers (altnets). The proposal involved Nexfibre, an altnet affiliated with Virgin Media O2 (VMO2), purchasing Netomnia, the country’s second-largest altnet, with the goal of strengthening VMO2’s competitive position against Openreach, the dominant fixed-line infrastructure provider.
The CMA's apparent preference for CityFibre—the UK’s largest altnet—to acquire Netomnia instead has drawn criticism from VMO2’s shareholders. This regulatory stance contrasts with the approval granted to BT for its acquisition of the struggling broadband operator TalkTalk, a move seen as enhancing BT’s market dominance. Critics argue that these decisions undermine efforts to develop a robust challenger to Openreach.
VMO2 CEO Ulf Ewaldsson publicly criticized the CMA’s approach, suggesting that raising competition concerns to block a smaller altnet acquisition in one case, while allowing a dominant incumbent to absorb a rival in another, sends mixed signals to investors and the industry. He warned this could deter future investment in the UK broadband sector and hinder meaningful market competition.
Industry analysts have echoed this sentiment. Robert Grindle, a telecommunications analyst at Deutsche Bank, noted that BT’s acquisition of TalkTalk will likely bolster BT’s retail broadband market share, making it harder for competitors like Virgin Media and the altnets to attract customers in the near term. Grindle said that Virgin Media’s discontent is understandable given the shifting competitive landscape.
In response to the regulatory environment, VMO2 is reportedly engaged in discussions with BT regarding access to Openreach’s infrastructure. This potential collaboration aims to widen VMO2’s broadband footprint and improve its ability to attract new customers, indicating a strategic pivot following the CMA’s intervention.
The CMA’s decisions underscore the complexities in balancing competition policy with sector consolidation in the UK broadband market. While the regulator appears to favor larger altnets capable of sustaining investment, smaller consolidations driven by VMO2’s owners face significant scrutiny amid concerns about market concentration and consumer choice.