CMA raise competition fears over nexfibre’s £2bn Netomnia UK broadband deal
The Competition and Markets Authority has published its preliminary findings for their fast-tracked Phase 2 investigation into the £2bn acquisition of full fibre broadband network Netomnia (Substantial Group) by the parents of nexfibre and Virgin Media (O2). Overall the CMA found the deal would result in a “substantial lessening of competition (SLC) in the wholesale supply of fixed broadband services.”
In case anybody has forgotten. Nexfibre (i.e. Liberty Global, Telefónica and InfraVia Capital), which shares some of their parentage with VMO2, announced in February 2026 that they’d reached a £2bn deal to acquire alternative network rival Netomnia (here). At the time the operator had already built their own FTTP network across 3 million UK premises (rising to c.3.4m premises and 500k customers by deal completion – expected in Q3 2026).
The deal was promoted as helping to unlock a £3.5bn investment in the UK market and assisting in the upgrade of 2.1 million of Virgin Media’s premises from coax (HFC) to full fibre technology. The combined nexfibre and Netomnia footprint aimed to reach 8m premises (FTTP) by the end of 2027, which when combined with Virgin Media’s network could collectively reach 20m premises (c.10m if only looking at FTTP) and create a “scaled, financially secure challenger” to Openreach (BT).
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However, critics of the deal, such as CityFibre, which had also been attempting to acquire Netomnia before nexfibre tabled the most attractive offer, stated that there was a lot of overlap between the nexfibre / Virgin Media and Netomnia broadband networks. A recent Point Topic study put the overbuild figure at 832,000 premises when looking at the FTTP side of these networks (here), but there’s much more overbuild with HFC (see below).
The CEO of CityFibre, Simon Holden, warned that the proposed agreement would “significantly reduce competition and the choice available to consumers, as well as force hundreds of thousands of Netomnia customers back to VMO2” – potentially raising the prospects of the UK returning to a duopoly between Virgin/nexfibre and Openreach.
Despite this, YouFibre is currently expected to adopt a similar approach to giffgaff on nexfibre’s network post-sale. The brand will thus be maintained, at least initially, with some separation. But over time there are concerns that negative changes could still sneak in (e.g. higher prices and mid-contract hikes).
Key Points of the £2bn Netomnia Acquisitions
➤ InfraVia, Liberty Global and Telefónica are committing £1bn in new net funding for nexfibre to fund the transaction – made up of £850m from InfraVia and £150m jointly from Liberty Global and Telefónica.
➤ Nexfibre will sell Substantial Group’s retail business, including the YouFibre brand (Brsk has been retired), to VMO2 for £150m – covering c.500,000 customers.
➤ Nexfibre will finance the FTTP upgrade of 2.1 million homes covered by Virgin Media’s old HFC network (i.e. those that are “adjacent” to the Netomnia footprint). We’ve already seen this process begin (here).
➤ VMO2 will pay wholesale fibre access fees on its customers within the 2.5 million VMO2 homes that overlap the Netomnia fibre footprint.
➤ In exchange for the wholesale traffic commitment on the 4.6m premises, Virgin Media O2 will receive 1) c. £1.1bn in cash and 2) an indirect 15% stake in nexfibre. The vast majority of the proceeds will be available for deleveraging and the £150m to finance the purchase of Substantial Group’s 500,000 customer base.
➤ VMO2 will provide a full suite of managed services to nexfibre – including construction – in return for ongoing management and construction fees.
The main potential obstacle for the agreement was over the question of whether or not the CMA would throw up any major stumbling blocks or rubber stamp it, particularly as the Government had already given a broadly favourable response to the pairing. The CMA’s recent flexibility toward big telecoms mergers (e.g. Three UK and Vodafone) had also shown that it might be in a flexible mood.
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However, before the CMA could even proceed to a Phase 1 probe, nexfibre’s parents instead opted to fast-track it into a deeper Phase 2 investigation (here), which normally requires that there also be sufficient evidence to conclude that the legal test for a Phase 2 reference is met (i.e. that a merger is or may be expected to result in a Substantial Lessening of Competition (SLC)).
Nexfibre and Netomnia did not themselves concede that the merger could reduce competition in the supply of fibre broadband or any other services.
Preliminary Results of the Phase 2 Competition Probe
The preliminary findings of the CMA’s Phase 2 investigation today found that the transaction amounts to a relevant merger situation (RMS) that “may be expected to result in a substantial lessening of competition (SLC) in the wholesale supply of fixed broadband services,” although this is not yet the CMA’s final decision and concessions could still be reached to allow the deal to proceed.
Joint statement on behalf of nexfibre’s shareholders
“The CMA’s Interim Report does not reflect the commercial and competitive reality of Britain’s fibre market. It fails to prioritise the fibre investment the country needs, and the creation of a scaled, sustainable challenger to Openreach.
In its Strategic Steer to the CMA, the Government states that it ‘expects the CMA’s approach to clearly, and unambiguously, reflect the need to enhance the attractiveness of the UK as a destination for international investment’.
This deal unlocks £3.5 billion of international investment, which would increase consumer choice and support the faster rollout of full fibre broadband nationwide.
Standing in the way of this deal would suggest that Britain is closing the door on international investment, further entrenching Openreach’s monopoly, and leaving consumers to pay the price.
We will continue to engage constructively with the CMA to secure an outcome that backs sustainable competition, investment and growth.”
A spokesperson for CityFibre told ISPreview:
“The CMA is right that this proposed transaction would significantly reduce competition and risks the benefits being delivered for UK consumers: faster speeds, greater innovation and lower prices.
After recognising that harm, it is vital that the CMA takes the next step and blocks the deal.”
The interim report appears to have considered what might have happened had, as part of the earlier bidding for Netomnia, the company remained independent or been taken over by rival bidder CityFibre. “The evidence shows that Substantial’s financial outlook has deteriorated in recent years, and whilst it was a viable option to continue as a standalone entity, this was not attractive compared to a sale at an acceptable valuation,” said the report.
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The CMA said that Netomnia’s internal documents and financial evidence show that Substantial’s shareholders had a “strong incentive to reach a deal with CityFibre” (absent the Transaction with nexfibre) and CityFibre was likewise highly motivated to conclude a deal with Substantial. The CMA added that “CityFibre would likely have been able to raise the required funding for a valuation that was acceptable to Substantial’s shareholders.”
In short, the CMA concluded that the most likely counterfactual, to the deal with nexfibre, would have been an acquisition of Substantial by CityFibre, with a subsequent sale of Substantial’s retail businesses to a third-party ISP. The CMA also considered the counterfactual for Nexfibre, had the deal not been reached, which concluded that VMO2/nexfibre would have continued to compete in the wholesale supply of fixed broadband to ISPs. So no big surprises on that front.
At this point it’s worth noting that the “relevant market” being considered by the CMA does not include VMO2’s cable / HFC network (“as there is no demand from wholesale customers” for that, noted the CMA), but they have still taken into account future ‘cable to FTTP’ upgrades in their analysis (i.e. were all of Virgin’s lines to eventually be upgraded to FTTP, as is still the ambition).
CMA Statement on Wholesale Competition and Overbuild
In our view, the Transaction gives rise to a significant reduction in wholesale competition across the Parties’ FTTP network footprints (for simplicity, we focus here on the VMO2/nexfibre network). Our analysis shows that VMO2/nexfibre’s network is fully overlapped by Openreach, c.14% overlapped by Substantial, and c.18% overlapped by CityFibre (with minimal overlap between Substantial and CityFibre). In the counterfactual, the Substantial network would have been acquired by CityFibre, and there would therefore be wholesale competition between three providers – Openreach, VMO2/nexfibre and CityFibre – in all these areas of overlap (ie c.32% of the total VMO2/nexfibre network).
Following the Transaction, CityFibre would not be present in the Substantial network footprint (due to the minimal overlap), and there would therefore only be wholesale competition between Openreach and VMO2/nexfibre in these overlap areas (ie in the areas of the VMO2/nexfibre footprint overlapping with Substantial). Relative to the counterfactual, this reduces the proportion of VMO2/nexfibre’s total network in which VMO2/nexfibre, CityFibre and Openreach are all present from c.32% to c.18%. In other words, the Transaction would materially reduce the competitive constraints on VMO2/nexfibre in a significant part of its network.
We have focussed above on the VMO2/nexfibre network. As a comparison, the Substantial network is c.26% overlapped by VMO2/nexfibre’s FTTP network, and would be c.82% overlapped if VMO2 were to upgrade its cable network to FTTP. In the counterfactual, there would be competition between Openreach, VMO2/nexfibre and CityFibre in these areas, compared to just Openreach and VMO2/nexfibre following the Transaction.
Our provisional view is that this would have a significant impact on wholesale competition within the Parties’ network footprints, because CityFibre is a vigorous wholesale competitor. It has secured wholesale agreements with Tier 1 and Tier 2 ISPs, on highly competitive terms, with Tier 1 ISPs indicating that they consider CityFibre’s wholesale offer to be strong, particularly in terms of price, network speed and reliability. Compared to the counterfactual, in which a combined CityFibre/Substantial would be present across a larger proportion of the VMO2/nexfibre footprint, the Transaction would therefore lead to significantly weaker conditions of competition.
In terms of competitive constraints on the Merged Entity, Openreach is an important wholesale competitor. However, it is a regulated entity that cannot freely compete on key metrics such as price and service, with CityFibre, VMO2/nexfibre and altnets offering lower prices and (on some metrics) greater service quality. Further, there are very few other wholesale constraints, with other altnets being small in scale. Our provisional view is that the constraint from Openreach and other altnets would not be sufficient to mitigate the impact of the Transaction on wholesale competition.
The CMA also considered the potential benefits of the deal and whether the Parties’ claimed efficiencies are “timely, likely and sufficient to prevent an SLC from arising“, although we already know the answer to that from the CMA’s overall conclusion. The competition authority recognised that the deal would lead to some increased scale for VMO2/nexfibre, but that VMO2’s own FTTP upgrade programme “will erode most” of that.
Apparently only “limited evidence” was supplied to support VMO2/nexfibre’s claim that the deal would materially increase the likelihood of ISPs agreeing a wholesale deal with the merged operator. But no evidence was provided to show that there would be a clear benefit in this footprint being wholesaled by VMO2/nexfibre rather than CityFibre.
All of the relevant parties will now be given until 5pm on Friday 16th October 2026 to submit their proposals for remedies to the findings (i.e. concessions that might allow the deal to proceed). The challenge is in whether or not such proposals will be enough to overcome the CMA’s concerns, which appear to be quite strong.
As we’ve suggested before, stronger wholesale requirements (inc. non-discrimination commitments) for Virgin Media’s consumer broadband network and nexfibre would be a start. At present both operator’s are still quite restrictive – mainly selling via ISPs controlled by the group, such as giffgaff and Virgin Media retail. We think this is something VMO2/nexfibre are already prepared to deliver, but it may not now be enough.
The CMA’s Phase 2 investigation has already set a statutory deadline of 15th December 2026 to reach a final conclusion. ISPreview has queried with nexfibre what concessions (remedies) they might be prepared to offer and will report back if they respond. But one risk here is that blocking the deal, which is now a bigger possibility, might potentially set a precedent that actually makes it harder for other altnets to consolidate out of difficulty.
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook, BlueSky, Threads.net and Linkedin.
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So the CMA & CityFibre believe that the deal will reduce competition for consumers despite YouFibre staying independent (aside from the wholesale element referenced)
But if CityFibre, the Manchester United of the telecoms world, actually had any money, and not just refinanced debt masquerading as cash, they would have sold YouFibre to another ISP, which is fine apparently despite reducing consumer choice!
It’s principally regarding the loss of competition in the wholesale market, which although likely to have a downstream knock-on effect in the retail market, is not the CMA’s main concern.
Starting an ISP isn’t as difficult as build a wholesale infrastructure, If a new ISP wanted to start having competition on what infrastructure they want to sell on gives them choice
It reads to me like “If they get it – they would dominate the market and competition would suffer, but if we got it – nothing to see here”
Hypocrites – just spitting the dummy.
Confused, well you live up to your posting name 🙂
I smell a rat with the posting, vested interests or a BT fan.
VM are also a huge pile of debt and have been in separate cable companies since the beginning back in the late 80’s and 90’s. This deal would make it even worse for them – whether VM/Nexfibre/VMO2.
Given VMO2 get £1.1 billion out of it, £950 million net claiming they’d be in a worse position due to debt if it doesn’t happen is an interesting take.
> they would have sold YouFibre to another ISP, which is fine apparently despite reducing consumer choice!
CityFibre is a wholesale only network, they always sell off any retail ISPs that come with network acquisitions (sometimes even back to the founders of the network), They don’t want to be seen as completing with the ISPs on their network.
However, I don’t agree with your point that it would reduce customer choice. Right now I could get OR GPON FTTP, YF XGSPON FTTP, or Virgin HFC. If YF gets sold to VM02 My choices stay the same, until nexfibre start wholesaling their network. If sold to CityFibre, I gain access to other ISPs on XGSPON as well as YF, OR, VM.
But can’t fault you on CityFibre being heavily in debt. But debt isn’t the end of the world, I mean, how long did it take Telewest/NTL to pay off their netweork build/acquisition debt? Right, they never paid it off (Aint VMO2 in ~£20billion of debt?)!
So… customers with HFC would be able to upgrade by moving to the competition, but if the merger goes ahead they’ll be able to upgrade by moving to the Not-Competition-Any-More?
And that “unlocks £3.5bn of investment”?
Wow. Business is hard brainz.
I think we all know how bad Virgin Media are, this is good news I left VM for you fibre and would leave again if needed.
Not all fairytales have a happy ending then
It was a mad idea to start with
because Virgin was overbuilding themselves
when they upgraded their Network to FTTP
Houses will have one ONT from BT Openreach
and two from Virgin
or how do Virgin decide to use which Network
to use in the overlapping areas
Just Mad, plain mad
The new Virgin (nexfibre/mustang) FTTP network is underground like HFC, instead of overhead. Also doesn’t use PIA and carry the associated costs.
So, it’s a no brainer they would decomission the Netomnia network in areas where they have overbuilt. Assuming it comes to it, although not sure why they would want to run both side by side indefinitely.
Nexfibre is delivered via Openreach poles in our village to properties that are served by poles and they did a dig for parts of the village that didn’t have poles.
If the deal goes ahead, and where there is crossover, would VM ultimately abandon their underground ducts that haven’t been upgraded to fibre?
Overhead is cheaper to install and maintain, even if OR gets a small fee
Overhead isnt cheaper to maintain, that’s why we went underground. Overhead is way more susceptible to damage.
Overhead was chosen recently because it was cheap and quick to deploy. It should have been banned in all but the most difficult areas to reach.
If this transaction is not given the go-ahead, the roll-out of fibre in the UK is likely to decline to a trickle.
Unless the players in the market are allowed to achieve scale, there will be insufficient profitability to fund investment in the fibre and wireless networks.
Strong Disagree. By blocking the merger you actually then have two companies who will need to compete to stay afloat. That’s the whole point of having the competitors. They’ll either have to push harder to get customers on the network built – or continue building to gain more customers.
Continue building = rollout continues or increases. They can achieve scale, this is realistically an anticompetitive purchase to make up for the fact nexfibre hasn’t rolled out quickly enough to keep others at bay.
Keep CityFibre as the 3rd biggest competitor. They have debt, so does VM/VMO2/Nexfibre and even BT.
With regards to consolidation of smaller AltNets – this isn’t such an issue, as Netomnia were one of the large ALtNets and overlapped with VMO2 quite a bit (hence the real reason why VMO2 wanted to take them out).
Continue building with what funding, Matt? There isn’t any left, CityFibre burned through it spending a grand a premises.
The industry is battered precisely because this gov made sure if interest rates weren’t enough of a deterrent then high taxes are
Spent months ditching staff to polish the company… now the CMA might smash the mirror. If it does? Don’t call we’re busy building our future ✌️
I think the people caring only about lining their pockets are feeling a little apprehensive now
Wish this would just hurry up and finialize, I want to order YouFibre on nexfibre!
And I want to order Zen on Nexfibre! I’ve got OR and Netomnia past my house, Netomnia has the technically better XGS-PON network and OR has the better choice of ISPs!
If you take a step back and look at things from an ISP perspective, they currently only have a choice of two FTTP operators – Openreach & CityFibre as VM/O2/NexFibre don’t offer a Wholesale product. From a consumer perspective, end customers, i.e. those of is buying broadband services, have a large choice of companies to buy from.
If CityFibre purchases Netomnia and NexFibre don’t offer a Wholesale product then there will be three networks in places (Openreach, CityFibre and VM) but only two networks any ISP except VM can buy from. From the consumer perspective the choice of ISP to buy from remains unchanged.
If NexFibre buys Netomnia AND offers a Wholesale product (which they may well do, and all the ISPs have the ability to negotiate with them for competitive pricing) then there are still only two Wholesale operators, and in fact the consumer choice remains the same (as consumers can still buy their service from VM).
The question then is when will NexFibre launch their Wholesale product and announce that Sky, Vodafone, Zen and others have all signed contracts which means there is a true Wholesale market of three operators …… (at which point, bye-bye CityFibre in my view)
Hugely short-sighted and simplistic assessment from the CMA. Proof that non-specialist competition authorities should not be critiquing complex telecoms transactions.
If the deal is blocked (it is looking that way), nobody will be investing another penny into UK fibre. There will only be one buyer in town: CityFibre. It seems as though if they can’t have Netomnia, nobody can.
If the conclusion (and it appears to be) is that this is blocked on the basis that VMO2/nexfibre overlaps with Netomnia, this precludes nexfibre (the most capitalised/willing buyer in the market) from purchasing any other altnet of scale, bar a few niche rural players.
UK fibre is going down the drain, investors are due to suffer huge losses/write downs and we will prove once again why we are an uninvestable nation.
Meanwhile, throughout this CMA debacle Openreach has grown by 3-4 million premises, and they are laughing.
VMO2 has a bad name, but anyone with an ounce of common sense will realise that the CMA is heading down a very dangerous path.
Yeah we really would miss American Liberty Global in guise of VM. Ask a previous customer or two lol
Load of nonsense about not investing in fibre. That reason is government policies mainly and interest on loaned finance. Only VMO2 spouted that line as a threat to get their desired outcome from CMA.
You say “Proof that non-specialist competition authorities should not be critiquing complex telecoms transactions”.
The CMA says “Ofcom has provided data and expertise on technical
matters, and assisted us in developing our understanding of the relevant markets”. Can’t get much more specialist than the UK telecoms sector regulator!
I suspect the full report, which the CMA says “will be published shortly”, will provide more detail on its thinking behind the decision. Unlikely to be simplistic as you claim. Anyone with any experience of UK merger control will be aware that the CMA will have had to thoroughly consider submissions from many stakeholders in significant detail and conduct detailed analysis as part of its investigation process, rather than defying basic “common sense”.
Why would anyone invest? If the only buyer is cityfibre who has no cash and will likely only pay via equity shares, why would any rational investor put another pound in the market? Cityfibre will have zero equity value right now, a single glance at their annual accounts will show you the cash they are burning through. How is pricing 40% lower than Openreach a sustainable business model with the eye watering debt they carry? I am coming from a commercially minded view, not one that is clouded by any disgruntlement at VMO2 like most people on this website
If this deal goes through, will it make either Virgin or Netomnia more likely build to your address if you currently have neither service?
My town has both in abundance but a few streets were missed. They are among neighbouring streets with coverage.
This will have ripples in the Alnet community as there was no doubt other deals in the background waiting to happen . The bit I don’t get it how all these alnets have built on top of each other so when one is struggling why buy it when they already cover where you have network so what is the point. But where netomnia have network where VMO2 have network your not going to walk away from the underground network you spent building in the 90s and but the cable companies into debt so which part do you decommission or sell to another provider. I did think of this was to go ahead there would be conditions for VMO2 that they would have to open up all of there networks to wholesale even the HFC it has been done before with AOL . This would mean VMO2 operating model would have to change but if needs must .
They will run the numbers and calculate if its worth migrating existing PIA customers over to ducts. For example for me, If Nexfibre were to take over Netomnia, Nexfibre would have to retrench from the street to the property and replace the fibre that already exists, vs paying OR for the PIA that already exists. Where an altnet is using overhead PIA from poles, your are currently looking at ~£13-15 per annum per pole + a small charge for each customer. They might decide its not worth rushing out to re-fibre everyone right awey
Think it’s clear the cma is acting predominantly for the millions of people losing choice , the millions of people who don’t want to join vm or a subsidiary of it , looks like it’s in favour of cf but that’s not the case it’s just cf will be the ones benifiting if the deal gets rejected ,
Be interesting to see if Jeremy comes on this thread like he has previously to defend his abandonment of being a challenger and opting to sell out , cf will hopefully offer him the money this time to get the deal done ,it never is or was worth 2 billion let’s be honest .
It would be a great outcome if it is blocked, we don’t want the duopoly of OpenReach and Virgin Media to continue by them swallowing up competitors. We really do need a third provider to ensure adequate competition, this is why it would be better to see the merger of some of the other operators into a well resourced third provider.
Virgin need to be made to open up their ducts to PIA as a pro quo for the reduced competition their deal delivers.