Liberty Global, Telefonica and VMO2 confirm new joint network plans

Virgin Media O2 and owners Liberty Global and Telefonica have confirmed they are in discussions with a number of potential financial partners regarding a new fibre joint venture.

The new entity is apparently tasked with building out a full fibre network of up to 7 million premises in new greenfield areas by the end of 2027, with VMO2 acting as an ‘anchor tenant’ of the new network. The announcement makes no mention of where this network will be built, so we’re left to to assume by the reference to VMO2 that it’s the UK. This follows reports last month in which some sources claimed the companies were looking to raise as much as £1 billion from investors for the new project.

It’s not clear why the creation of a new entity would be required in order to increase footprint in the UK fibre market, when the companies involved could just extend VMO2’s network. But it looks like some overlap between the two entities is planned in terms of services, and it may have something to do with the fact this new network will also be available to other ISPs on a wholesale basis.

“Virgin Media O2 will commit to being an anchor tenant of this new network, with its proven track record of achieving 30% penetration in new build areas with project Lightning,” said CEO Mike Fries. “The network will also be available to other ISPs on a wholesale basis. As this will extend the company’s gigabit reach to ~23m premises once completed, it provides Virgin Media O2 with incremental growth opportunities by offering services to a wider pool of customers and higher cross and upsell due to the increased overlap of fixed and mobile services.”

The news was announced as part of Liberty Global’s Q4 2021 financial results, in which it reported revenue decreased 42% year on year on a reported basis and increased 1.9% on a rebased basis to $1,920.8 million. The release does not make it clear, but we’re assuming this discrepancy between reported and rebased numbers is a recalculation taking into account Virgin Media is no longer on its books. Liberty Global’s share price was down 3% today, so all things considered the numbers seem to have had a modest impact on investor confidence.