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Virgin Media O2 to Boost UK Fibre and 5G Rollout via Mast Sale

Thursday, Apr 20th, 2023 (7:42 am) - Score 7,000

Broadband ISP and mobile giant Virgin Media (VM O2) have reportedly started the process that could lead to them selling off all or part of their stake in the UK’s largest mobile tower network, which could fetch around £750m (half its stake). The funding would then be used to help fuel their full fibre (XGS-PON) and 5G mobile rollout.

At present the parents of Virgin Media (Liberty Global) and O2 (Telefonica) hold a 50% stake in mast operator Cornerstone, which forms part of a network sharing agreement with mobile rival Vodafone (Vantage Towers). According to the FT (paywall), VMO2 has now begun the process to sell “at least” half of its stake in this, with Goldman Sachs and JPMorgan being appointed to oversee the process.

NOTE: Cornerstone manages a UK estate of over 20,000 sites (masts, rooftops, small cells etc.).

Potential bidders are reported to have already been sent details of the sale, and the operator will allegedly soon begin fielding requests for proposals for the tower group. Such a plan was first hinted at last year (here) and it’s a logical move, since in recent years it’s become increasingly common to see mobile operators selling off tower assets to help fund upgrades elsewhere.

In the case of VMO2, the operator has a number of expensive projects to both deploy 5G mobile, and upgrade their old Hybrid Fibre Coax (HFC) based fixed broadband network to 10Gbps capable Fibre-to-the-Premises (FTTP / XGS-PON) technology by 2028 (Project Mustang) – at a cost of c.£100 per home.

On top of that, VMO2 – supported by InfraVia Capital Partners – has also formed a new Joint Venture – called Nexfibre (here) – to build a wholesale focused FTTP broadband ISP network that will cover “up to” 7 million additional UK homes (the build has already begun). The goal of this is to “initially roll out fibre” to 5 million homes not currently served by VMO2’s network by 2026, with the “opportunity to expand” to another c.2 million.

VMO2 has previously confirmed that it would cost £4.5bn – supported by £3.3bn of fully underwritten financing commitments and up to £1.4bn in equity commitments – to reach the first 5 million homes under the aforementioned expansion. The £3.3bn in that was said at the time to reflect “fully underwritten debt financing from a consortium of financing banks, including a £3.1bn capex facility.”

Alternatively, VMO2 could use the extra funding to help support a potential £3bn takeover bid for the UK’s third-largest alternative full fibre network, CityFibre (here). Clearly, VMO2 are considering a lot of different approaches for the future right now, but selling a stake in their tower estate is a natural step. None of the relevant players have commented on the FT’s piece.

However, even if VMO2 get the funds sorted to do everything they want with FTTP and 5G, we can’t help but wonder how much fuel will then be left in the tank for future upgrades to 6G technology etc.

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By Mark Jackson
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 and .
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20 Responses
  1. Avatar photo Brian H says:

    Now VMO2 know how much It’ll cost to buy Cityfibre there gathering up the funds to complete the purchase.

    That will mean a massive shift in the Altnet market.

    1. Avatar photo Hugh P says:

      You’ve got to feel for the guys at Cityfibre.

      First hundreds of redundancies announced early this year then the prospect of being bought out/taken over by Virgin Media.

      Of course there won’t be any warning either, they’ll just turn up for work one day and it’ll be announced that it’s happened.

      Not a pleasant situation to work in.

      Sadly that’s how modern business work, companies owned by investors that have no real interest in the business other than to sell at the right moment to exit with a profit.

    2. Avatar photo Charles says:

      Feel even more sorry for the guys who kelly are training right now – who are going out on CF contracts. they will be short lived

    3. Avatar photo Feeling worried says:

      How worried should I be?

      If/when Virgin bought Cityfibre would my job in CF’s marketing department be at risk?

      How do these things normally pan out?

      Should I be looking for a new job right now?

      People say everything will be fine but I’m not so sure.

    4. Avatar photo Andrew G says:

      @Feeling worried: Well, there’s no clear advance notice on these things. There is already consolidation in the altnet sector, that’s going to continue apace. You’ll never know if CF are going to be bought or merge until it is publicly announced. If it’s VM’s owners who buy it (unlikely in my view, but still possible) then chances of your job staying and in the same location are low (note that the speculation was only public chatter, and it was in regard to the Telefonica/Liberty Global wholesale JV, not VMO2, but makes no odds to you). If CF merge with another altnet, your fate depends on who holds the upper hand. If it’s CF, and the merged entity is run largely using CF’s business functions you’re likely to be OK (until the next round of M&A, when it’s all up in the air again).

      Best advice based on several rounds of this myself: Sharpen your CV, start looking. Make a few applications to test the CV (if you’re not getting at least 50% of applications getting at least a screening call or first interview, your CV or application technique needs urgent attention). Hopefully you’ll have a good hit rate, then use those interviews to get back in the swing of things – remember you’re starting off doing this for practice, not jumping at the first opportunity, it’s OK to take it right up to a job offer and decide that its not for you. What you shouldn’t do is nothing, sitting tight, hoping everything will be OK whilst worrying about it. Maybe it will all be OK, but don’t rely on that. CF will be looking after the interests of their senior managers first, their investors second, their customers third, their brand fourth, secured creditors fifth, …….and employees are somewhere down about number thirteen.

    5. Avatar photo Mark says:

      @Andrew G. I agree, sound advice.

  2. Avatar photo James says:

    Interesting how Goldman Sachs have been appointed to oversee the sale, guess which Altnet they also part own.

    1. Avatar photo Reality Bytes says:

      Goldman Sachs were involved in Liberty Global’s acquisition of VM, in the selling of the LG/Telefonica mast assets in Belgium and LG presented at a Goldman Sachs event last year.

      Goldman Sachs are one of Liberty’s go-to banks.

      As a shareholder I would be pretty irritated if Liberty paid £3 billion for a million premises VMO2 don’t pass. It would be lunacy. Maybe 1/5th of that would be more reasonable.

  3. Avatar photo Anon says:

    Well instead of looking at a takeover of CityFibre, maybe they ought to look at investing in their own network infrastructure as there’s a reason why they’re considered the worse UK operator with slow speeds and no 5G, WiFi calling etc for PAYG or the virtual mobile operators using the O2 network.

    Get their own house in order before looking at mergers and takeovers.

    1. Avatar photo 4chAnon says:

      You’re missing the key reason VMO2 don’t need to get their house in order. O2 Priority’s sausage rolls.

    2. Avatar photo George says:

      4chAnon, so you’re happy with slow 4G speeds, infrastructure full to capacity, no 5G or 4G/wifi calling that pretty much every other operator offers such as Vodafone, Voxi, Three, Smarty, 1pMobile etc just as long as you get your free sausage roll from Greggs?

      *rolls eyes*

      O2 DO need to invest in their own infrastructure as they ARE the UK’s worse network as such they SHOULD get their own house in order FIRST.

      Once they’re fully in the 21st Century and their network is on par with the other 3 than maybe look at takeovers or mergers.

      Until than they ought to stay well away from City Fibre.

  4. Avatar photo Yatta! says:

    It may a popular amongst their peers, however I’m unconvinced that this is a “logical move”, rather myopic short-termism, selling the family silver for a temporarily healthier looking balance sheet, then having to rent it back indefinitely.

    1. Avatar photo John says:

      I don’t think it’s to improve the look of the balance sheet.

      I’m guessing it’s to raise capital to purchase and takeover Cityfibre.

    2. Avatar photo Yatta! says:

      Of course it’s to raise capital John, however there are methods to do without the sale of assets, including debt, that would impact the balance sheets of VMO2’s parent companies.

      I have absolutely no idea if VMO2 have intentions to purchase Cityfibre, though undoubtedly there will be consolidation of AltNets in the near to medium future, as there were of the numerous cable networks that popped-up in the 1980s and 90s.

    3. Avatar photo Andrew G says:

      Have to agree with Yatta! Sale and leaseback of property didn’t help high street retailers (despite which they’re still doing it), and neither will selling off the masts help VMO2. Simply puts VMO2 at the mercy of a third party. Prices will be baked in to the initial deal covering some years, but at some future point the then owners will have free reign to demand what they want for an asset that VMO2 need, and have no alternative option. Since O2 was the bit of the VMO2 that makes money, seems that even that is passing over the event horizon into the Liberty Global black hole of finance.

      But then again, VMO2 don’t cover their cost of capital as it is, and have only ever been a corporate finance game centred on Liberty Global’s complex debt structures. Existing management can’t run a profitable broadband business, so the whole edifice drifts along like a supertanker with no engine. There’s nothing driving it forward, no control, but simple inertia keeps the thing in motion. You have to wonder whether Telefonica’s board now see the VMO2 merger as such a good idea – obviously they thought that merging one bad business with one good business resulted in one larger good business.

  5. Avatar photo A VM02 customer says:

    The only positive move Virgin Media could make is shutting down.

    1. Avatar photo Ex Telecom Engineer says:

      Hear hear!

  6. Avatar photo Karl Hobson says:

    All these altnets getting funding and making fttp available at a massive cost…I think there is a clue in the name alternative network, if there is no uptake in the service there offering at £100 per household I see a gloomy future for many and abandoned networks. It’s carnage in the network at the moment with so much damage to existing live network with everyone cramming there cables and nodes in the ground and up street furniture (poles) in an already crowded environment. There will be winners and losers in the race for fibre rollout. The network will suffer as all providers cut costs to invest in the fastest roll out.

    1. Avatar photo Harry J says:

      Also makes you wonder about the long term reliability of the hastily installed cables.

      I’ve heard horror stories of installations being signed off without inspection, just to get the RFS numbers up quickly to keep the money men happy.

  7. Avatar photo Mark smith says:

    The reason why VMO2 is getting out of cornerstone isn’t because they need the moneys (as is being reported across the news this week), it’s because there is a paradigm shift and they want to get out of cornerstone whilst it still has value.
    VMO2 are moving towards an era of small cells to deliver 5g stand alone. These small cells need to be delivered at scale on street furniture (lamp posts and telegraph poles) and will need fibre back haul. They will be deployed on openran and a neutral host model to accommodate all MNOs and frequencies, with a cloud platform.
    Macro sites such as these traditional mast sites which make up cornerstone’s portfolio will still be needed but will become less and less important and again will be moving towards and openran and neutral host model, where all the operators have to be treated equally by the likes of cornerstone. (This will be set by OFCOM).
    Currently all macro sites are doing essentially is little more than displaying the 5g symbol on peoples devices. It’s fake 5g.
    The future is all about 5g and 6g small cells and that is going to require a lot of fibre.
    City fibre is a much better fit for Vodafone to buy. But Vodafone actually does need the cash so would do well to sell themselves out of vantage towers to fund such an acquisition. But they are in a mess at this time, totally rudderless without a CEO.
    VMO2 won’t buy cityfibre. The JV which their owner liberty global setup ‘nexfibre’ might though.

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