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Virgin Media O2 is in talks to acquire the UK’s fourth-largest broadband network operator in what would be a landmark deal to consolidate the UK telecoms market.
A takeover of Netomnia could be worth around £2bn, according to two people familiar with the matter. Its fibre optic network is available to 2.8mn homes and has more than 400,000 customers.
A deal could combine Netomnia’s network with VMO2’s own operation and that of Nexfibre, a broadband joint venture between VMO2 shareholders Liberty Global and Telefónica alongside InfraVia Capital, to create a fibre network serving 8mn homes, according to one of the people.
The move would help VMO2 cement its status as the largest broadband competitor to BT’s Openreach, as well as marking the first step in a long-awaited consolidation of the UK home fibre market.
Netomnia, which was founded in 2019, provides customers with full-fibre broadband and is the second-largest “altnet”, or alternative network provider, after CityFibre. VMO2 has 5.6mn broadband customers and also offers a mobile service.
The non-exclusive talks would be a blow to CityFibre, which has long touted itself as being best placed to snap up smaller broadband providers and cement its status as a challenger to VMO2 and BT.
CityFibre has also approached Netomnia about a potential tie-up, according to several people familiar with the matter. They added that a deal with CityFibre, which would include both cash and equity, was still a possibility.
Virgin Media O2, Telefónica, Netomnia, CityFibre, Nexfibre and Liberty Global all declined to comment. InfraVia did not respond for comment.
The expected deal comes at a difficult time for the dozens of smaller fibre network operators as fewer customers choose their services than they had hoped.
After a post-pandemic investment boom that funded the high cost of installing fibre lines, the sector is now struggling with higher interest rates and more than £8bn of net debt, according to Enders Analysis estimates.
Netomnia is one of the few players to have minimal debt levels, making it an attractive target.
A deal between VMO2 and Netomnia is unlikely to encounter competition concerns, with the telecoms regulator Ofcom having signalled that consolidation in the market was inevitable.
VMO2 also said on Thursday it was signing a multiyear deal with Elon Musk’s Starlink to give its mobile customers the option to use its satellite network to make mobile calls and tackle “not spots”, where there is no signal.
The company said the deal, which will come into effect next year, would see its mobile network coverage reach 95 per cent of the UK by the end of 2027, up from close to 90 per cent now.
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