Virgin Media O2 looks to raise big money for new fibre push

There are rumours afoot that Virgin Media O2 is in talks with investors to bring in hundreds of millions of pounds for a new fibre rollout in the UK.

Mary Lennighan

January 31, 2022

3 Min Read
VMO2 gigabit van

There are rumours afoot that Virgin Media O2 is in talks with investors to bring in hundreds of millions of pounds for a new fibre rollout in the UK.

Should the various reports that emerged over the weekend prove correct, the cable operator will essentially set itself up as a serious competitor to UK incumbent Openreach – and a raft of altnets of varying sizes – in the full fibre space.

According Sky News, the telco’s parent companies Liberty Global and Telefonica have begun talks to raise the aforementioned “hundreds of millions,” and possibly increasing to £1 billion over time, from external investors. The discussions are with infrastructure funds, the news outlet’s sources say, and are geared towards the creation of a new corporate entity charged with the task of rolling out fibre-to-the-home (FTTH) to 7 million premises.

As rumours go, it’s a highly credible one. Prior to its merger with O2, Virgin Media had long been the UK’s second fixed infrastructure provider after BT’s Openreach. A move to cement that position makes a lot of sense. To add further credibility, the FT ran the same story, albeit without the financial projection, citing sources of its own. The companies will start contacting potential investors this coming week, the financial paper said, but some preliminary conversations are already underway.

Virgin Media’s fixed infrastructure at present covers north of 15 million premises in the UK. Late last year it announced the completion of its Gigabit upgrade, a project to bring download speeds in excess of 1 Gbps to its entire fixed network. That network is largely based on HFC technology, a fibre-cable hybrid, upgraded to DOCSIS 3.1, which cannot offer the symmetrical upload speeds that full fibre can. With full fibre players springing up at pace in the UK, Virgin needs to offer more to ensure its position in future. But the telco made it pretty clear there was more to come.

“Having reached this major milestone in just two years, we’re doubling down on our mission to upgrade the UK by continuing to innovate and invest in our network to support the technologies of tomorrow – there’s no slowing down at Virgin Media O2,” said chief executive Lutz Schüler in December.

And building an open access full fibre network with the support of third-party investors seems like a logical choice of direction.

There is likely to be no shortage of interest from the investment community. As we have noted many times, investors are lapping up infrastructure assets the world over and are increasingly getting in on the ground floor too – helping to fund the build, that is. KKR is probably the most high-profile example at present, although its decision to invest in Italy’s FiberCop pales into insignificance somewhat now it has made a takeover bid for the incumbent. And in Germany Deutsche Telekom has created a fibre expansion joint venture with IFM, while Liberty Global has teamed up with private equity firm InfraVia Capital Partners to co-invest in fibre rollout.

Whether or not that puts InfraVia in the frame to plough cash into Liberty Global’s UK venture is anyone’s guess. But what it does demonstrate is that Liberty Global is no novice in this area and is more than capable of attracting investment partners. Although it is just a rumour at this stage, the smart money says we will have a fibre investment announcement from Virgin Media O2 sooner rather than later.

About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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