Virgin Media O2 owners seek CMA review of £2bn Netomnia deal after BT-TalkTalk approval

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Virgin Media O2 eyes CMA review

Highlights

Liberty Global and Telefónica requested the CMA revisit its assessment of Nexfibre's £2bn Netomnia acquisition following BT's approval to buy TalkTalk.
Virgin Media O2 argues that the BT-TalkTalk deal materially changes UK broadband market dynamics and that TalkTalk's 2.5 million customers must now be factored into competition analysis.
CityFibre, identified by the CMA as a potential Netomnia buyer, is undergoing refinancing with a £900 million shareholder injection amid £3.9 billion net debt and a £545 million pre-tax loss last year.

Regulatory challenge follows BT-TalkTalk intervention

As first reported by Financial Times, Liberty Global and Telefónica have written to the Competition and Markets Authority seeking a supplementary interim report on Nexfibre's proposed purchase of Netomnia, according to people familiar with the matter. The shareholders argue that BT's agreement to acquire TalkTalk has materially changed competitive conditions in the UK broadband market.

Earlier this month, the CMA's interim findings said the Netomnia-Nexfibre deal could result in a substantial lessening of competition in the wholesale supply of fixed broadband services because of overlaps between the companies' existing networks. Days later, BT announced a deal for debt-laden TalkTalk after regulators feared the rival operator was nearing insolvency.

Culture secretary Lisa Nandy invoked an emergency protocol to override antitrust concerns, saying disruption to TalkTalk's services posed a genuine risk to life and public services. Virgin Media O2 chief executive Lutz Schüler criticised the difference between the two cases as perverse, while the company seeks to persuade the CMA that TalkTalk's 2.5 million customers now need to be considered in a changed market structure.

Scale, financing and wider market impact

A combination of Netomnia and Nexfibre would create a fibre network covering 8 million homes. By comparison, BT's Openreach serves nearly 25 million homes with fibre broadband, while BT's retail arm holds an estimated 30 per cent market share, according to Enders Analysis.

VMO2's shareholders also contend that CityFibre, which the CMA identified as the likely alternative buyer for Netomnia, does not have the financial capacity to mount a counterbid. CityFibre is negotiating a refinancing under which shareholders are offering £900 million in new funding in exchange for lenders accepting losses on their loans; the company has £3.9 billion in net debt and made a £545 million pre-tax loss last year.

The CMA can issue supplementary interim reports when new evidence emerges or further analysis changes the picture in a case. The regulator said it is inviting feedback on its interim report and that a final decision will be made after any responses are assessed.

CityFibre said the CMA had already examined its finances in detail and was aware of its recapitalisation plans, including the proposed £900 million shareholder contribution. The company added that it has invested about £7 billion in the UK fibre market in recent years and expects to invest a further £5 billion by 2040, while Liberty Global, Telefónica, InfraVia and Nexfibre declined to comment.

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