Virgin Media O2 is a planning to launch a new fibre-building joint venture with its owners Liberty Global (NASDAQ:LBTYA) and Telefonica to challenge BT Group PLC (LSE:BT.A)'s Openreach subsidiary in the high-speed broadband market, according to news reports.
Liberty Global (NASDAQ:LBTYA) and Telefonica, which created Virgin Media O2 in a £31bn merger last year, have begun talks to raise hundreds of millions of pounds from third-party investors to fund the rollout of fast fibre broadband to 7 million more British households, according to Sky News.
One source told the news channel that the external capital injection could eventually total as much as £1bn.
The rollout of the fibre-to-the-premises would be in areas of the UK where Virgin Media O2 does not have a meaningful presence.
One insider told Sky News said the new network would be on an open access basis, with Virgin Mobile O2 as the anchor tenant but with the option available for others to use it for a fee.
It will be owned separately to Virgin Media O2's existing fibre network, which is being upgraded to 15.5 million premises by the end of 2028.
BT has already committed to spending £15bn to provide full-fibre networks to 25 million homes by 2025.
Karen Egan, a telecoms analyst at Enders Analysis, said the joint venture would have to offer a better price than BT Openreach to ensure it attracted enough customers.
“BT Openreach will become a competitor in a short timeframe,” she told the Financial Times. “It’s difficult to see how the financials stack up.”
Analyst Polo Tang at UBS said although plans appear to be at an early stage, the implications for the UK broadband market “will depend on who the partners for VMO2 are", and his team “remain wary of rising broadband infrastructure competition for BT/Openreach from both VMO2 and a growing number of well funded altnets, most notably Cityfibre".