Nexfibre and VMO2 acquire UK altnet Upp

UK fibre joint venture nexfibre and telco VMO2 have jointly acquired altnet Upp, which operates in the East of England.

There are a couple of stages to the transaction – to start with VMO2 will purchase Upp and over the next 12 months will carry out integration work such as aligning systems, completing in-progress fibre build and offering VMO2 services to Upp’s 4,000 odd customers.

Nexfibre – a joint venture owned by Liberty Global, Telefónica and InfraVia Capital Partners – will then acquire the network assets through a back-to-back agreement.

The acquisition will increase the fibre footprint of nexfibre by 175,000 premises in the East of England, and through access to it VMO2 will be able to extend the reach of its gigabit services.

In the longer term nexfibre, with VMO2 acting as a build supplier, will continue to expand its network in the East of England, and has earmarked around £350 million to reach more than 500,000 premises by 2026.

“Virgin Media O2 is playing a key role in supporting nexfibre with integration work and build, and through our wholesale partnership we will extend the reach of our gigabit connectivity in the East of England,” said Lutz Schüler, CEO of Virgin Media O2. “Building on the strong foundations that exist today, Virgin Media O2 and nexfibre have a clear strategy in place to be the biggest fibre challenger in the country, offering greater choice and competition to the BT status quo.”

Andrea Salvato, Chairman of nexfibre added: “Our acquisition of Upp’s network assets represents an important step as we continue to build a world class fibre network along with our wholesale partner Virgin Media O2.  At nexfibre, we are on a mission to build and expand our network in suburban and semi-rural areas, closing the digital divide and boosting local economies. Upp is a high-quality regional fibre network in the East of England and will accelerate our rollout in an area where we expect to invest more than £350 million by 2026.”

Commenting on the deal, Matthew Howett, Founder and CEO at Assembly Research said: “Today’s announcement could well be the first domino to fall in terms of an altnet being bought by one of the big players. The UK broadband market is set to enter an era of scaled connectivity challengers, after first a period of dominance from the incumbent followed by a proliferation of altnets. Altnets are a key piece of the connectivity jigsaw, but consolidation has been inevitable as new sources of funding dry up, focus on take-up intensifies and investors increasingly demand returns.

“The particular circumstances of this transaction make sense both from an economic and a network perspective. With minimal overlap between the operators’ footprints, it won’t attract regulatory attention from competition authorities, but instead establishes a blueprint for future transactions.

Whether or not this particular deal will precede an imminent spree of larger players hoovering up localised altnets is impossible to tell of course, but consolidation in the space has certainly been tipped before, due to the sheer amount of them operating in the UK presently.

It’s also worth noting that, according to the FT, Upp was backed by an investment company called Letter One, whose Russian founders were affected by recent sanctions, and ultimately the UK government ordered the sale of the altnet last year on national security grounds.

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