Virgin Media O2 to launch rival to BT’s Openreach

VIRGIN MEDIA O2 (VMO2) is preparing a fresh challenge to the dominance of BT’s Openreach, setting up a network infrastructure business that will seek to poach wholesale customers from the former state monopoly.

The telecoms business said yesterday it would set up a dedicated network arm, comparable to Openreach, to house its fixed broadband assets.

The business is expected to have revenues north of £1bn, connecting 16m households, and will seek to take on internet providers that currently pay to use Openreach’s fibre network.

The structure will give VMO2’s owners, Liberty Global and Telefonica, the option to bring in additional investors as it upgrades its cable network to fibre.

It may also look to buy up struggling “alt nets”. These smaller fibre providers have been building networks in parts of the UK, largely funded with debt investment, but are facing greater costs amid rising interest rates and inflation.

Openreach, which is owned by BT, currently sells access to its network in wholesale deals to broadband providers such as TalkTalk, Sky and Vodafone.

Lutz Schüler, chief executive of VMO2, said the restructure “reinforces our position as the leading challenger to Openreach in the market” and provides options for “alt net consolidation and wholesale opportunities in future”.

Kester Mann, an analyst at CCS Insight, said: “With dozens of alternative providers, the UK is ripe for consolidation and such a move would bring Virgin Media O2 crucial scale benefits.”

The new business will be distinct from Nexfibre, a joint venture between Liberty, Telefonica and infrastructure fund Infravia, which is also seeking to connect remote parts of Britain.