Virgin Media O2 has announced plans to establish a new fixed network company alongside its major shareholders Liberty Global and Telefonica as it looks to take on rival telco BT.
The new subsidiary of VMO2, called the NetCo, will manage a network covering approximately 16.2m premises across the country, in what the company said will create the biggest direct network challenger to BT Openreach in UK history.
VMO2’s move into the fixed-line wholesale market by offering access to its fibre and cable networks to other providers represents a “direct challenge” to BT’s Openreach unit which is “long overdue”, according to CCS Insight analyst Kester Mann.
“Creating a new network company with a dedicated team could enable Virgin Media O2 to pursue merger and acquisition opportunities in the fixed-line broadband market,” he explained.
“With dozens of alternative providers, the UK is ripe for consolidation and such a move would bring Virgin Media O2 crucial scale benefits.
“Attention will now turn to which providers would consider signing up with the new entity, how it could be regulated and whether there will be any response from Openreach,” Mann added.
If the deal is cleared by regulators, Virgin Media O2’s mobile assets will be kept separate from the NetCo. Nexfibre, a joint venture focused on fibre network expansion in new areas, will continue to operate independently.
Once fully implemented, the combined networks of NetCo and nexfibre are projected to reach up to 23m homes.
Lutz Schüler, chief executive of VMO2, said: “This is a logical evolution of our fibre strategy that creates a clear, focused and scaled network entity within the Virgin Media O2 family which underpins our shift to a fully fibre network and reinforces our position as the leading challenger to Openreach in the market.
“Working closely with our shareholders, this network business will provide a platform for potential altnet consolidation and wholesale opportunities in future, offering widescale network choice for other providers, as well as giving financing optionality.
“While nothing changes today work is well underway and you’ll hear more from us later in the year.”
On Friday morning, the telecoms giant said it reached a record number of sites in 2023 but it posted a £3.3bn loss following a huge goodwill impairment to its accounts.