Virgin Media O2 expands fibre rollout to take on BT

Newly merged telecoms giant launches assault on Openreach with ultrafast broadband upgrade

VIRGIN Media O2 has unveiled plans to upgrade more than 14m homes and businesses to ultrafast full fibre in an attack on BT’S dominance of the broadband market.

The newly merged company will expand its full-fibre network over the next seven years, as BT and smaller broadband builders race to kit out the nation with gigabit speed connectivity.

The rollout will build upon the 1.2m homes connected to full fibre through Project Lightning by installing fibre inside tunnels already used by its cable network. The move will enable Virgin Media O2 to step up its challenge to BT’S infrastructure builder, Openreach, by handing it more opportunities to offer wholesale access to broadband retailers such as Sky, Vodafone and Talktalk.

Shares in BT fell more than 8pc to 169p as investors reacted to the Virgin announcement and its own update.

Lutz Schuler, chief executive of Virgin Media O2, said the new fibre upgrade was an “offensive investment” that would allow the company to “go and win more business”.

He said: “We haven’t entered the wholesale business at all, so we need to see how that will work out. We want to be the fastest today, and remaining the fastest in the future is the strongest position to negotiate from.”

Broadband builders are under pressure from Boris Johnson to upgrade 85pc of the UK to gigabit speed broadband by 2025. BT is planning to spend £15bn on upgrading 25m homes and businesses from copper phone networks to faster full-fibre broadband by December 2026.

Virgin Media O2 said its full-fibre upgrade would be “one of the UK’S most efficient”, costing £100 per home and increasing its capital expenditure by £2bn a year. It sealed its £31bn merger in April, creating a telecoms giant with revenues of £11bn and 47m customers. In its maiden set of results since the deal, the company said profits rose 6pc to £935m in the second quarter after adding 36,000 broadband subscribers and 1m mobile connections.

Separately yesterday, BT said revenues fell 3pc to £5bn and pre-tax profits dipped 4pc to £536m for the three months to June as “challenging market conditions” affected its overseas arm.

Philip Jansen, chief executive of BT, said the move by Virgin Media O2 “made complete sense” and he remained “very confident” of BT’S plans. He said: “The country needs two top quality companies delivering the best technology and we need competition to drive innovation.”

Mr Jansen is trying to modernise BT by slashing costs and offloading fringe operations, such as pay-tv channel BT Sport, to help steer it back to growth.