BT, Sky, Grain and Hyperoptic Comment on Nexfibre’s £2bn Move to Buy Netomnia
The UK Competition and Markets Authority (CMA) recently published several responses from BT (Openreach), Grain Connect, Sky Broadband and Hyperoptic to the ‘Areas of Focus’ document for their Phase 2 competition investigation of Netomnia’s proposed £2bn acquisition by the parents of Virgin Media (O2) and nexfibre. The early feedback provides some useful market perspective.
Just to recap. The owners of nexfibre, which share some of their parentage with Virgin Media and O2, announced earlier this year that they’d reached a £2bn deal to acquire alternative network rival Netomnia (here), which has more recently been fast-tracked into a deeper Phase 2 competition review (here).
Netomnia’s full fibre broadband (FTTP) network currently covers around 3.2 million UK premises (inc. 500,000 customers). But nexfibre said the combined network footprint would reach 8m premises (FTTP) by the end of 2027, which when combined with Virgin Media could collectively reach 20m premises (c.10m if only looking at FTTP) and create a “scaled, financially secure challenger” to Openreach (BT Group).
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However, critics of the deal, particularly Simon Holden, CEO of CityFibre, which had also been trying to acquire Netomnia before the nexfibre move was announced, have some reservations. According to Holden, 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”.
A number of other network operators and retail ISPs have since provided some feedback on the agreement, albeit in response to the CMA’s earlier ‘Areas of Focus‘ document that sets out the scope of the inquiry (note: business wholesale is out of scope). The responses largely reflect somewhat of a vested interest sandwich, which is to be expected, but they do still provide some extra insight from different quarters of the market.
Sky’s Response (PDF)
Sky noted that as a major broadband ISP they depend entirely on wholesale local access from third-party networks and thus have a “unique perspective on the likely effects” of the deal. Sky currently only sells broadband packages via Openreach and CityFibre’s networks.
Sky broadly made the point that nexfibre and Virgin Media’s (O2) gigabit-capable broadband networks should be assessed as a “single economic entity for the purposes of its competitive assessment“, which they said partly reflects how nexfibre has “no independent engineering capability (it has fewer than 50 employees, all in corporate roles), no wholesale systems, and no operational capability to build or operate its network independently; its network build and wholesale activities rely entirely on VMO2.”
The provider added that, in areas where Netomnia’s network overlaps with VMO2 (approximately 80% of Netomnia’s footprint), the Transaction “reduces the number of infrastructure competitors from three (Openreach, VMO2 and Netomnia) to two (Openreach and the combined VMO2 / nexfibre / Netomnia entity).” Sky added it “does not consider that the Transaction will create a more effective challenger to Openreach capable of delivering stronger retail competition” and warns that the “reduction in wholesale competition resulting from the Transaction weakens the competitive pressure.”
Sky said the consolidating parties should also demonstrate that any claimed acceleration in fibre rollout or fibre take-up is merger specific. “VMO2 / nexfibre already has a lower-cost route to achieving that outcome by completing the upgrade of its existing [coax] network [to FTTP], without removing an independent competitor … In any event, to the extent that there are any incremental benefits, they are already available in the counterfactual where customers can buy FTTP from Netomnia,” said Sky.
Hyperoptic’s Response (PDF)
As one of the UK’s largest alternative networks, Hyperoptic kept their response short and said they “[do] not currently identify competition concerns that would lead us to oppose the proposed transaction and considers it has the potential to support a stronger and more sustainable alternative fibre platform, which may contribute positively to the long-term competitive structure of the market and the continued development of infrastructure-based competition in the UK.”
Naturally Hyperoptic may be considering doing some consolidating of their own in the future, or being consolidated by another provider, which may thus be considered as forming part of the context for their interest in the CMA’s review (i.e. they might not want to end up creating any roadblocks that could be used against their own merger attempts in the future, should any come to pass).
BT Group’s Response (PDF)
BT’s response could perhaps be seen as coming more from the perspective of their “legally separate” network access business, Openreach, which is obviously the market incumbent for consumer wholesale broadband infrastructure and products.
On this point BT focuses quite a bit on the pro-competition arguments of the acquisition and how a material share of wholesale cost savings from the deal are “expected to be passed through to end consumers in the form of lower retail prices“, which they predictably say is open to question.
“This presupposes that there will be effective dynamic competition between the merged entity and Openreach, such that the Parties are incentivised to pass any efficiency gains on to their end customers,” which BT disputes due to the regulation they face from Ofcom that hinders their ability to respond.
Extract from BT’s CMA Response
The regulatory constraints on Openreach’s ability to compete mean that the full benefits of that competition will be limited. Today, ex ante regulation does constrain competition, in both the speed of competitive response and the types of response, notwithstanding requests for support from Openreach’s customers.
Notably:
a. Openreach is not able to offer lower prices in areas of greater competitive intensity, without Ofcom’s consent – and, as noted above, Ofcom applies a stricter (REO) cost standard than would apply under competition law, limiting the depth of discounts Openreach may offer.
b. Openreach cannot offer bundles of services or put in place offers which are conditional on the volumes of orders placed, without notifying them to Ofcom.
c. Openreach must notify offers publicly on up to four months’ notice, reducing speed to market and providing an opportunity for its competitors to respond ahead of an offer taking effect.
Broadly BT sometimes seems to be arguing more against Ofcom’s regulation, which exists partly to limit Openreach’s ability to pressure new entrants out of the market, rather than the Netomnia consolidation itself. At the same time they appear to indicate that the deal might require Ofcom to review how Openreach is regulated in some areas (i.e. potentially softening the rules).
Grain Connect’s Response (PDF)
Grain, speaking as a relatively small alternative network that covers 300,000 UK premises with full fibre broadband and connects 56,000 customers, broadly seemed to follow a similar line to Hyperoptic and probably for much the same reason. In Grain’s view, the “most likely route to a third scale wholesale fibre broadband operator” is the combination arising from the Netomnia and nexfibre merger, but they don’t agree that it will result in lower retail prices.
“We broadly agree with the parties’ submission that the combination will enhance wholesale competition. However, we do not think it will lead to reduction in retail prices, for the simple reason that retail competition at present is already as intense as it has ever been, driven by major ISPs’ responses to alternative network competition in general,” said Grain.
Interestingly Grain also expressed its view that a footprint of at least 1 million premises ready for service (RFS), extensive geographic reach and business operations (networks, systems and services) consistently delivering service performance to mass retail market standards (i.e. at least as good as Openreach) are required to be a “credible wholesale provider” today.
The CMA has until the statutory deadline of 15th December 2026 to reach a conclusion on the proposed acquisition.
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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Sky’s comments are a little strange given they don’t take wholesale services from Netomnia. If there’s so much potential for the deal to harm wholesale competition strange they haven’t taken advantage.
Suspect their comments are more likely in the hope it gets knocked back and they get access to Netomnia on the same terms they have on CityFibre’s existing network through CityFibre acquiring Substantial.
No but they would have done if CityFibre had acquired Netomnia before VMO2 jumped in. I suspect the prospect of a CityFibre/Netomnia tie up may have been dangled in front of them when they signed up with CityFibre.
Netomnia has been the 2nd largest AltNet in the U.K. since August 2024…2 years later, no Sky (Which is coincidentally the day Cityfibre and Sky signed an agreement).
Skys comments make sense. They don’t want to have to deal with another wholesale operator, especially one controlled by their arch rivals, VM. But they also flag real concerns that Nexfibre has done very little to demonstrate they are serious about being a wholesaler. I wouldn’t be suprised if in a few years time they conclude the wholesale market has failed so that whole footprint just becomes a closed Virgin Media network.
“so that whole footprint just becomes a closed Virgin Media network.”
That option is certainly available to them. However, given how badly VM treat their customers, they can expect a far lower utilisation of their network than if they allowed wholesale access. That in turn translates directly into a lower return on their capital.
The effect is magnified by the huge degree of overlap between the two networks; they effectively have two lots of debt to cover from the same set of RFS properties.
If there’s any logic at all in the Netomnia acquisition, it’s because Netomnia *do* have a working wholesale platform. They still have to convince the large service providers to use it though.
Sky’s response is the only sensible one.
They’re all sensible from the PoV of those saying it. But Sky’s is as self-interested as all the others. That’s the point of a consultation – to take everyone’s views on board before reaching a (hopefully) objective conclusion.
We all know these prices won’t come down. VM are already expensive as is so a merger which adds costs will definitely not drive down prices even as a wholesale opportunity.
Check your Internet bill 10 years ago, and show me that it has increased compare to now. At some point you have to admit that inflation has driven price up but broadband pricing has not despite delivering much higher speed. If pricing are not going up, then you need to save somewhere through efficiency, it is not rocket science. A company is no different than a household, expect, our “salary” has not increased, but all the other costs have, and we have massively upgraded the house 🙂
The ISPs you consider ‘expensive’ are the ones that are actually covering their costs and running as sustainable businesses.
The rest of the industry is caught in a slightly manic death spiral, pricing lower and lower, not even covering the interest on their debts, let alone repaying them, hoping that their rivals slam into the ground before they do.
@jeremy
2003 – 512kbps ADSL was £65 a month
2026 – 8Gbps is now £50 a month (£4 more than an expensive than an ISP on 1Gbps who also caters for power users over 24 months
Point proven and a good one too
Thank you Simon. I had my first 512kbps with cable in Paris in years 1999…The good old days.
lets hope the deal doesnt go through
Yes, agree on that as wouldn’t want to go back to virgin media.
Wonder what the plan is here, if the deal went through in relation to infrastructure, especially where there is a netomnia,virgin media,nexfibre overbuild.
Is it the case of moving the kit from open reach PIA into the virgin media-nexfibre owned ducts and chambers. Or is it the case of virgin media paying Openreach to continue the use of poles, chambers and ducts.
Either way it will be a migration headache and costly.
Love it – CEO of Cityfibre has a comment about this – but nothing when it comes to why his company does half a town and then sods off. Maybe the CMA should investigate that?
What I was thinking about grain, does like 7 streets in a town in 4 years, yet those that actually put the effort in to the towns (nexfibre) are the bad ones? -.-
I really hope this goes through, only in the hope that I can order YouFibre via nexfibre network, that would be a game changer!
Thank you!
Still struggling to believe that Sky (or, at least, its American parent Comcast) never tried to buy Netomnia either.
Sky don’t want to own infrastructure, they want other people to build it and then agree rental contracts in a competitive market. In the early days of FTTP they had that joint venture in York with TalkTalk and they bailed on it pretty quickly in favour of writing letters to The Times about how Openreach needed to build FTTP quicker.
Nobody who doesn’t already have UK network investment is going to buy an altnet in the current market. They have too much debt (BT might be attractive though). If/when alnets can be bought for pennies then outsiders might take an interest.
Sky Broadband will be a bit of an oddball within the NBCUniversal operation and may well be sold to generate funding for consolidation within the new organisation.
Netomnia/youfibre needs to stay independent.
We don’t want virgin to buy them, and for some reason people want cityfibre to buy them. Have you seen the news of cityfibre? That is not a healthy company, cityfibre cut their staff 60% to “save money”, a company that needs to save money is not a company that can afford to aquire other companies. Also cityfibre is only a B2B company. Other companies that they bought with a consumer ISP, they shutdown the consumer ISP and forcefully moved the customers to Sky or TalkTalk.
Cityfibre cant afford netomnia, especially with netomnia’s build trajectory, if netomnia stays independent, they will overtake cityfibre as the largest FTTP network in 1-2 years.
Cityfibres exclusivity on B2B sales is why they wont last. It has long been rumoured that to land Sky as customer Cityfibre offered them prices way below operating costs, making losses on every sale through Sky. With the constant redundancies they are doing since landing sky as a customer, I believe it.
As a youfibre customer, im happy to have 8gbit, if i was a cityfibre customer I could only get 5gbit max, some areas only 2.5. Cityfibre claims to have 8gbit, but I see nowhere selling it, its such a vapor claim, it should be investigated by Ofcom.
Cityfibre’s network is such a mixmatch of different networks it is atrocious.
Such a lot of false information there.
Cityfibre are wholesale only, not b2b. Their b2b business was Entanet which they have just sold.
“Other companies that they bought with a consumer ISP, they shutdown the consumer ISP and forcefully moved the customers to Sky or TalkTalk.”
I’m not aware of them ever having moved customers to Sky. For the Lit acquisition they sold the customers back to the Lit founders.
“if netomnia stays independent, they will overtake cityfibre as the largest FTTP network in 1-2 years”
Netomina have stopped building and just made their build team redundant. Nobody is building anything new at significant scale now.
“Cityfibre’s network is such a mixmatch of different networks it is atrocious.”
They have 1 network and their XGSPON rollout has long been completed. 5Gbps was a Sky exclusive for a while. I think I read something recently that it’s now available to all ISPs. But I guess not all ISPs have the capacity on their own networks to sell it.
Giant supports Netomnia/Jeremy 100% with whatever happens
Given vmo2 are widely considered to have a poor credit rating (£22bn debt?), I must note that they are buying a profitable company, paying £2bn for it, and the interest alone on that will likely exceed £100m pa
At a time it feels like the larger net firms are struggling against the competition provided by altnets, it sure does look like a) dominant player knocking a rival off the chess board, and b) the banks are set to make their Xmas bonuses from their new debt
NexFibre is buying Netomnia and 2m homes from VMO2. Facts matter.
VMO2 has a higher credit rating than the implied rating for CityFibre. However, VMO2 is not funding the acquisition. The acquisition is being financed via Liberty Global, Telefonica and InfraVia Capital, all of whom have much higher credit ratings.
By acquiring Netomnia, Nexfibre will be acquiring an established wholesale function (albeit targeted at the B2B sector). CityFibre glosses over this in its comments, possibly on the basis that the function would either be subsumed into CityFibre Wholesale services, sold, or shut down had CityFibre somehow managed to acquire Netomnia itself.
Lifting regulation of Openreach would, by its very nature, increase competition and lower wholesale prices. Openreach has, in fact, already had to respond to the challenge of the merged entity, as demonstrated in recent price changes and wording of its submission above.
Increased competition for Openreach, which this deal offers, at a scale that could soon be similar to that of Openreach, would be beneficial for IPSs. It would help eliminate the numerous zombie businesses that are holding back the sector with unsustainable pricing, and end the justification for the interference in the sector of the self-serving bureaucracy that is Ofcom.