Virgin Media O2 is close to becoming a customer of its biggest rival. The Financial Times reported on October 30 that the Liberty Global and Telefonica owned operator is nearing an agreement to use BT’s Openreach wholesale fibre network to serve new customers in areas its own network does not cover, and that it is pausing the upgrade of its cable network to fibre as part of a wider cost cutting programme driven by a debt pile of about 22 billion pounds. Neither company commented on the report.
The structure of the British market explains the pressure. Virgin Media and nexfibre together reach about 19 million premises, but only about 9 million of them have a full fibre connection; the rest sit on legacy hybrid fibre coax cable. Upgrading that estate was the company’s central capital programme. Openreach’s full fibre network, by contrast, already passes about 24 million premises and is on track for 25 million by the end of the year. Renting reach is far cheaper than building it, and the reported plan would have Virgin sell over Openreach only where it has no network of its own, leaving existing customers on Virgin lines.
The regulatory backdrop cuts both ways. Virgin had been set to receive a 1.1 billion pound cash injection tied to transferring 4.6 million homes to a network owned by nexfibre, but the Competition and Markets Authority signalled this month that it plans to block the associated 2 billion pound nexfibre deal for Netomnia, on which a final ruling is expected by December 15. ISPreview noted the tactical reading: surfacing an Openreach dependency underlines what follows if the regulator blocks Virgin’s own build path. A month ago Virgin’s chief executive was asking the same regulator to scrutinise BT’s takeover of TalkTalk for entrenching BT’s wholesale grip.
Markets priced the report before any signature. BT shares climbed 7.8 percent on October 30, investors rewarding wholesale revenue that costs BT nothing to build. No terms, prices or launch date have been reported, and until a contract is confirmed the story is a reported intention under financial pressure, not a done deal. But the direction is clear: in UK broadband, the binding constraint is now the balance sheet.