Telco adopts wholesale model for its fixed line broadband network as parent firm Liberty Global restructures Belgian, Swiss and Dutch ops
Virgin Media O2 and shareholders, Liberty Global and Telefónica, have initiated plans to create a distinct national fixed network company (NetCo) that they say will underpin full fibre take up and roll out and establish the biggest dedicated fixed network challenger to BT’s Openreach in the UK.
The trio signalled NetCo would also provide “new financing optionality” – cue infrastructure investors – and a platform for “potential altnet consolidation opportunities”, which signals the UK fibre altnet pool is about to get smaller.
NetCo will be a fully consolidated subsidiary of Virgin Media O2, will comprise the operator’s cable and fibre network assets covering 16.2 million premises across the UK today, with all upgraded to fibre in the coming years. The companies confirmed that the independent fibreco JV between Liberty Global, Telefónica and Infravia, nexfibre, will remain separate as in contrast to Virgin Media O2’s mainly urban footprint, that fibreco is targeting greenfield areas. It aims to expand FTTP to 5 million premises by 2026.
Collective footprint
Collectively, Virgin Media O2 and nexfibre have a full fibre footprint of more than 4 million premises today. However, the combined nexfibre and NetCo fibre footprints are planned to reach a combined total of up to 23 million homes depending on the rollouts which puts it neck and neck with Openreach. In December Openreach CEO Clive Selley said the company intends to keep building after it reaches its initial 25 million target, reaching up to 30 million premises with full fibre by the end of 2030.
VMO2’s mobile assets will not form part of the NetCo, nor will its consumer and B2B units. Through a wholesale agreement, NetCo will connect Virgin Media O2’s entire fixed customer base, providing revenue and attractive cash flow from day one of operation. NetCo will focus on completing the company’s ongoing fibre upgrade programme which sees the existing cable network overlayed with full fibre.
Logical evolution
“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,” said Virgin Media O2 CEO Lutz Schüler.
“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,” he said. “While nothing changes today work is well underway and you’ll hear more from us later in the year.”
According to the companies, the development of NetCo is underway between teams at Virgin Media O2 and its shareholders Telefónica and Liberty Global. As such, further details and operational timelines will be announced in due course and subject to any necessary regulatory approvals. In the meantime, fibre upgrade activity continues unchanged at Virgin Media O2.
Restructuring Belgian, Swiss and Dutch ops
Virgin Media O2’s parent, Liberty Global, separately announced a raft of restructures in a bid to boost its flagging shareprice, some of which have been hinted at by Liberty Global’s CEO Mike Fries a number of times in the last few months.
According to the Financial Times (subscription needed), the company intends to list its Swiss telecoms business Sunrise later this year, which it acquired for $7.4 billion less than four years ago, with shares allocated to Liberty Global investors.
It will also create a holding company for its Belgium unit Telenet and its stake in Dutch JV VodafoneZiggo as a precursor to a potential listing and to help it raise further capital.
Sunrise’s CEO André Krause said “We are excited at the prospect of being listed in Switzerland once again and providing local and international investors with access to our scaled FMC challenger position in the market. Following the successful integration and synergy delivery of the UPC combination, Sunrise has a very strong FCF profile and plans to offer an attractive shareholder remuneration framework. We will present more detail at a Capital Markets Day later this year.”