Virgin Media O2 plans to launch a fiber construction joint venture with owners Telefónica and Liberty Global as the group aims to take on incumbent operator BT in the broadband market.
Telefónica and Liberty Global, which oversaw the merger of Virgin Media and O2 to create the expanded group last year, will start contacting potential investors this week, but informal talks have already begun, according to a person familiar with the plan.
BT’s Openreach division and several smaller so-called ‘alternative networks’ backed by billions in private capital are racing to lay fiber across the UK, replacing their copper and cable networks to provide broadband connectivity to millions of homes.
BT has already pledged to spend £15bn to deliver full fiber networks to 25m homes by 2025, while around 50 alternative companies have entered the market, looking to provide connectivity in more rural areas or to partner with more established telecommunications companies.
Virgin Media O2 is already upgrading its fiber optic network to reach around 15.5 million premises by the end of 2028.
The new venture, which will be separate from this one, aims to build a new full fiber network that will provide connectivity to an additional 7 million homes, primarily in areas that currently only use copper lines and are served by BT.
Karen Egan, telecoms analyst at Enders Analysis, said the joint venture should offer a better price than BT Openreach to ensure it attracts enough customers. “BT Openreach will become a competitor in a short period of time,” she said. “It’s hard to see how the finances stack up.”
Unlike Virgin Media O2’s existing network, the future entity is expected to be free-to-air, with the option for other broadband providers to also use the network. Vodafone and Sky are seen as kingmakers in the market as they will decide whether to sign capacity deals with BT Openreach or Virgin Media O2.