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Virgin Media O2 Linked Nexfibre Acquire UK FTTP AltNet Upp UPDATE

Wednesday, Sep 6th, 2023 (7:18 am) - Score 11,544
Upp-Engineers-Jacket

Network builder nexfibre, which is working in partnership with broadband ISP Virgin Media (VMO2) – at wholesale – to roll-out a new 10Gbps capable Fibre-to-the-Premises (FTTP) network across up to 5-7 million extra UK premises, has today announced the acquisition of full fibre operator Upp in the East of England.

First, a bit of context. Upp is currently in the process of investing £1bn (via LetterOne) to deploy a new FTTP broadband network of its own across the East of England. The operator originally aimed to cover 50 towns (c.300,000 homes) in counties like Norfolk and Lincolnshire by the end of 2022, but so far we’ve only seen them go live in 24 of those and, until now, it’s been unclear how many premises they’ve actually covered.

NOTE: At present, Virgin Media remains nexfibre’s only anchor tenant ISP and they’ve struggled to attract others, but that may change once coverage grows (currently well over 300,000 premises).

Meanwhile, Virgin Media largely completed their own broadband expansion programme at the end of 2022 (16.1+ million UK homes serviceable). But since then the vast majority of new XGS-PON powered FTTP broadband build has come under nexfibre‘s new wholesale network, which is a closely linked joint venture company that was setup in 2022 by Telefónica, Liberty Global and InfraVia Capital Partners (here).

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The £4.5bn aim (£1.4bn in equity and £3.1bn in debt) of nexfibre is to expand full fibre to reach “up to” 7 million additional UK homes – staring with 5m by 2026 (i.e. those homes not currently served by Virgin Media). In theory, this could push the combined VMO2 and nexfibre footprint to around 80% of UK premises by 2028 (up to 23 million premises), which is close to Openreach’s planned FTTP build (i.e. 25 million by Dec 2026).

One way for nexfibre to grow more quickly is by acquiring some of their rivals in the alternative network space, many of which are currently under strain due to rising build costs, increasing competition (both at retail and network level via overbuild) and the need to secure a good level of take-up to satisfy investors. But in Upp’s case, the situation has been complicated by another factor.

Last year saw the Government ordered LetterOne – an investment firm that previously received significant backing from several prominent and now sanctioned Russians – to sell its entire stake in Upp in order to “prevent, remedy, or mitigate the risk to national security” (here and here). L1 complained that this was unfair as they’d since cut ties from the sanctioned individuals, and in April 2023 they sought a Judicial Review of the Government’s decision (here). But today’s deal may render that unnecessary.

Nexfibre’s Deal for Upp

The agreement announced today will see nexfibre gobble Upp’s existing network assets, which for the first time reveals that the AltNet had so far been able to deploy their full fibre network to cover 175,000 premises. Just for context, nexfibre added this many premises to their UK coverage in Q2 2023 alone (here).

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The all-cash deal is in two-stages. VMO2 will initially purchase Upp and carry out integration work – this includes aligning systems, completing in-progress fibre build and offering VMO2 services to Upp’s ~4,000 customers (we suspect they were struggling with so few users). But nexfibre will ultimately fund the acquisition through a back-to-back agreement to buy and own Upp’s network assets (175,000 premises). This integration work should be completed within the next 12 months.

Build and investment in the region will also continue, with nexfibre planning to invest upwards of £350 million to pass more than 500,000 extra premises with FTTP (XGS-PON) in the East of England by 2026. We note that VMO2/nexfibre’s existing network does already overbuild with some of Upp’s, but Upp also exists in many locations where Virgin’s service does not (low overlap), which helps to explain the rationale.

Drew Ritchie, CEO of Upp, said:

“Upp is delighted to have been acquired by nexfibre, in partnership with Virgin Media O2, and we are looking forward to continuing the rollout of full fibre in the East of England. It is an important recognition of the scale and quality of the network that we have built, and all the hard work and effort put in over the last two years.

Since we began in early 2021, Upp has grown to deliver the quality, scale and excellence in customer service envisaged from the start. We are all personally very proud of having this recognised by our thousands of customers and through the purchase by industry leaders.

We would like to extend our thanks to our previous shareholder for the belief and backing they gave us from the start and we’re now looking forward to working with the nexfibre and Virgin Media O2 teams to make the most of the opportunities ahead.”

Lutz Schüler, CEO of VMO2, said:

“Virgin Media O2 is playing a key role in supporting nexfibre with integration work and build, and through our wholesale partnership we will extend the reach of our gigabit connectivity in the East of England. Building on the strong foundations that exist today, Virgin Media O2 and nexfibre have a clear strategy in place to be the biggest fibre challenger in the country, offering greater choice and competition to the BT status quo.”

Perhaps unsurprisingly, the announcement makes no mention of the Government’s aforementioned intervention over security concerns, but today’s deal will naturally put an end to all of that anyway. But at the same time, it does look set to raise a few issues, such as the question over what will happen to the 180 staff that Upp currently employ and how will VMO2/Nexfibre approach areas where overbuild exists.

Customers of Upp’s service may also have reason to be concerned, even though the voices of just 4,000 users are unlikely to catch many ears in VMO2’s head office. Upp’s existing packages tend to be a fair bit cheaper, particularly in terms of post-contract pricing, than comparable options from Virgin. Suffice to say, they might not all welcome being “offered a wide range of Virgin Media O2 services in the coming months,” even though the provider has pledged no service changes occurring in the “near term” as a result of the transaction.

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For example, Upp’s top 900Mbps service (this is also symmetric speed, unlike on Virgin) currently costs £43 per month on a 24-month term (£45 for 18-months), including free installation and a WiFi 6 router. You also get the first 6 months of service for free. By comparison, Virgin’s comparable Gig1 Fibre plan (100Mbps uploads) costs about the same initially, but its post-contract prices are expensive at £73 and there’s no 6 months free.

UPDATE 10:44am

We’ve managed to get a few more details out of VMO2 on the deal. In terms of Upp’s existing workforce, there are currently no changes, but as integration work and the completion of existing build takes place and progresses (i.e. not all of those 175,000 premises are ready for service yet), VMO2 said that any “changes or opportunities” (i.e. job losses or role changes) will be discussed directly with individual employees.

In terms of nexfibre/VMO2’s approach to areas where Upp already overbuilds their network, the operator said this is still being analysed. But given the low overlap where minimal value is attributed to those overlapping homes, this acquisition is said to be “more about an efficient footprint expansion“. Due to a range of factors, it is thus “likely that Virgin Media O2’s fibre upgrade plans in the area will remain unchanged“, but no final decisions have been made.

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Mark-Jackson
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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53 Responses
  1. Avatar photo Consolidation in the nation says:

    And so it begins… reminiscent of the cable companies in the 90s…

    1. Avatar photo Ivor says:

      indeed, exactly as predicted. I’m sure there’s a nice pay day for the execs and the outgoing shareholder but not much good for staff and customers.

      turns out that all these upstarts whose business model seemed to be “hope openreach doesn’t / is prevented from competing” are colliding with reality

      While the 90s’ BT was prevented from fair competition, insanity hasn’t prevailed this time and we will all benefit – not just those in the cities who get cherry picked

  2. Avatar photo Jonny says:

    What a blow for Upp’s customers

    1. Avatar photo Winston Smith says:

      As opposed to going bust? The take-up rate is around 2.3%, which is about a tenth of what it takes to be viable.

    2. Avatar photo Big Dave says:

      It’s just a repeat of the ISP situation in the early 2000s. For example if you were with AOL (I was for dial up but went with BT for adsl) you would have ended up as a Talk Talk customer. I am afraid that is the risk you take going with an altnet while the market is in a considerable state of flux.

  3. Avatar photo Paul says:

    Cityfibre will be there next acquisition.

    1. Avatar photo adam says:

      More than likely, but there is a huge overbuild for virgin in some areas take the city of Derby as an example, would be more prudent for NexFibre to make acquisitions where there is minimal to no overbuild?

    2. Avatar photo John H says:

      @Adam. It’s not just about buying Cityfibre to acquire their network, it’s also about buying out the competition.

      So even if they’ve overbuilt in some areas it’s not a big deal.

    3. Avatar photo Matt says:

      @Adam, you also have to remember that irrespective of overbuild, this gets VMO2 fibre, which is the aim of the game for them.

    4. Avatar photo Lewis says:

      Even if VMO2 don’t buy Cityfibre, they’ll just out compete them, CF’s poor take-up rate will get even worse, when the debts continue to pile up and they can’t make a profit the investors will bail out.

  4. Avatar photo Norm says:

    No No No. Not that rubbish Virgin… .

    And I was interested in Upp internet. Now need to change mind.

    1. Avatar photo adam says:

      Nothing wrong with Virgin in new build areas, admittedly the older network is terrible in places but they are upgrading it.

    2. Avatar photo Ad47uk says:

      From what I have heard, I don’t blame you. I hate this large companies taking over smaller ones. they always lose what they were and become part of the larger company.

  5. Avatar photo Andrew G says:

    Whilst I have no time for Virgin Media, the proof of the pudding here is whether Nexfibre can attract wholesale business. I’d only go back to VM if they were the last ISP on earth, but if I had a reasonable choice of ISP with the network operated by Nexfibre then I’d certainly consider that.

    I suspect the problem Nexfibre are seen as VMO2, and VMO2 have no wholesale credentials (just the opposite in fact). Other ISPs may also distrust Nexfibre with concerns about unfair commercial practices that undermine their business in favour of VM, as well as regarding the complexity of VM’s non-wholesale network alongside Nexfibre’s arrangements as confusing and commercially conflicted.

    Taking a step back from the details and wholesale concerns, arguably (and no matter my dislike of Virgin Media) this has to be a good thing. Upp were certainly going nowhere in terms of sales, and the commercial outlook was bleak. This transaction puts the network assets with a business who does understand building and maintaining a network longer term, who has arranged financing for completion and growth. Yes, if you were forcibly migrated from Upp to VM’s grim customer offer you might be unhappy. But Upp weren’t going to be around for the long term, so stick it out with whatever VM offer, or revert to Openreach’s best offer.

    And one other thought, this transaction hints at a strategy for Nexfibre and VMO2. Why buy Cityfibre (which would be expensive) when you’re ramping up to VM XGS-PON transformation, meaning you’d either have two duplicate networks, or need to write off the HFC and RFoG investments in CF areas? Makes no sense. What does make sense is the previously hinted at transfer of VMO2’s networks into Nexfibre as the XGS-PON upgrades complete, and then simply buying altnets to extend the footprint? Maximises the use of existing group assets, selectively expands the network to areas where VM never went, and because VMO2+Nexfibre group has the resources, they can probably complete partial builds where an altnet was struggling. That could be a win for everybody.

    On that basis, rather than CF being in VMO2’s sights, then further acquisitions would be altnets outside the existing VM footprint (what’s the overlap with Giganet?), and perhaps Hyperoptic, whose MDU-focused network is potentially a sizeable addition to the VMO2 network. Although Hyperoptic largely operates within the VM footprint, the MDUs it serves are generally not served by VM or other networks.

    Maybe some good will yet come of VIrgin Media, after years of inflicting misery on customers?

    1. Avatar photo FibreBubble says:

      I don’t see Virgin buying CF. Too much overlap in established areas. This small player is a much better fit for Nexfibre with minimal overlap and no doubt sold cheap and in distress. I doubt it will be the last.

    2. Avatar photo Big Dave says:

      Perhaps Ofcom should enforce the same rules on neutrality with Virgin Media with regards to wholesale as they do with Openreach especially if they do acquire CF at some point in the future? Don’t forget including their DOCSIS assets they are currently this countries biggest gigabit capable network.

    3. Avatar photo Andrew G says:

      If Nexfibre grow to offer an appreciable footprint of wholesale connectivity, I’d expect Ofcom would be forced to apply the same rules to them as to Openreach, although with Ofcom such things take forever.

      But personally I’d draw the line at true FTTP, both from a VM perspective and from the regulators. DOCSIS HFC is an ancient technology on its way out. It’s appreciably less reliable than true fibre, prone to congestion and intermittent hard to diagnose noise faults, which would lead to lots of three way disputes between all parties as to why some customer has a problem, and who is liable. I’d hope VM retain and operate HFC under their existing closed business model, but that as they upgrade their network to XGS-PON they transfer that to Nexfibre and open it to wholesale.

      But it’s VMO2/Nexfibre’s call. Never underestimate the ability of companies to make the most appalling and ill advised choices.

  6. Avatar photo Just when I thought I was out says:

    They pull me back in.

    Great, so Virgin sat back, watched alt nets spring up and is now going to acquire them one at a time until there’s nothing left. I truly despise virgin media (I’m a customer btw not just ranting for no reason). This should not be allowed.

    1. Mark-Jackson Mark Jackson says:

      I highly doubt they’ll acquire them all, that’s not even remotely realistic, but they may have designs on a few of them and that’s just fine. It’s a free market. Better that than watch some of those networks fail.

    2. Avatar photo S S says:

      Unlucky. Awful company. I leave them this month and have been bombarded with call after call. They even call you on numbers that look like mobile phone numbers to trick you into picking up the phone, just like other scammers. Truly despicable company.

    3. Avatar photo Alex A says:

      You’re making it sound like Virgin forcefully bought them.

      Upp only got 2.3% take-up, they are a failed altnet. Its not suprising with investor issues that they got sold.

  7. Avatar photo JJ says:

    So how much did Nexfibre pay to acquire Upp then?

    1. Avatar photo Darry says:

      £84m

    2. Avatar photo EricW says:

      I can see an amount of £66m paid via companies house “alotment of shares” document, would imagine it is related but probably not the whole picture. Not sure on the £84m number, would like a source for that.

  8. Avatar photo Al says:

    Is investing £1bn to cover 300,000 premises correct? If they’re towns they sound like some could be area 2, and against a build cost of £3,333 per premise! How did that business case ever take off?

  9. Avatar photo FibreBubble says:

    The problem for Nexfibre is that Virgin want their cake and eat it. They offer access to wholesale in the limited number of new build areas which is difficult to get customers to install.

    Whilst they protect their existing plentiful established areas which may be easier to attract customers many of whom already have the network installed even if they are not using it.

    In my view they are not really offering big players like Sky and TalkTalk the numbers but they are offering the risk.

  10. Avatar photo mike says:

    Are you f***ing kidding me?

    I want to get away from Virgin Media.

    CityFibre were just about to get to my street in Norwich and now that’s stalled.

    Upp were just about to get to my street, and now Vermin Media have purchased them.

    Virgin is just a cancer that you can’t get rid off.

    1. Avatar photo Some Norfolk resident says:

      I’m in the same boat as you. My Openreach line is poor and Upp has been digging up the local area, so I thought I was about to get some decent service (900 Mbps symmetric is THE DREAM!).

      I saw their roadworks come closer today and thought to check on them, to find out they’d been essentially forced to sell up and bought to VM.

      Nobody I know has anything good to say about VM and of course they don’t do symmetric speeds or static IPs. What a let down.

  11. Avatar photo James says:

    Interesting how Cityfibre are pausing their builds that overlap with VMO2.

    I think we can guess who they’ll be acquiring next.

    1. Avatar photo Ex CF employee says:

      It appears that CF and Lanes I, have paused the entire southeast build with no works since Friday 1st September. Not sure whether this is a CF or Lanes decision but time will tell.

    2. Avatar photo Watch this space says:

      Cityfibre are pausing builds, right when you’d expect them to be ramping up the build rate to meet their target of 8 million premises.

      They’re blaming the pause on problems with build contractors, but of course that’s just an excuse.

      There’s going to be a big announcement shortly.

      Watch this space.

    3. Avatar photo mike says:

      One of their contractors was Telec who’ve gone bust. That’s not an excuse. That’s a verifiable fact.

    4. Avatar photo Jim says:

      @Mike – Yes, but ask yourself an important question… Why did Telec go bust?

      Because they invested heavily to work on the Cityfibre contract, then Cityfibre pulled the plug.

    5. Avatar photo Big Dave says:

      CF seems to be getting through contractors almost as quickly as it burns through cash. They can’t all be duds.

    6. Avatar photo mike says:

      @Jim

      Are you really saying CityFibre deliberately made Telec go bust so they could use it as an excuse to pause their rollout while a deal with VM goes through?

      Seriously?

    7. Avatar photo Jack says:

      Just spoke to a Lanes-I colleague and he confirmed the build is stopping here in Kent and said the next step is uncertain along with the outcome of the streets that have been completed.

      He said they have been laid off and that nothing is likely to happen until the new year now. He also put belief and gut feeling to the idea that Virgin would most likely pick up the streets where the digging work had been finished, as its next to their exisiting footprint here.

      Oh well, my chance to go with them is probably over. Openreach is my next hope….

  12. Avatar photo anonymous says:

    What annoys me in this, is that VM will likely cap the upload speeds down to asymmetric to match their current HFC network tariff offerings, and their extremely dubious business operations of rip off price increases yearly (hence “Which?” asking Ofcom to investigate their contractual exit terms and wording), along with extortionate post contract offer pricing. It remains to be seen how many other ISPs are allowed to wholesale the service, but I am sure the underlying wholesale price will not be competitive and just the status quo.

    1. Avatar photo Matt Rowley says:

      If that does happen, I suspect it’ll be in the short term. I do think they will change their offerings to exploit the additional capacity though. We know that they can tailor offerings on their website to cater to different areas, depending on network capacity. I see no reason why they wouldn’t map fibre areas to postcodes and offer them XGS based packages.

      It has to happen at some point, otherwise they’ll be waiting to migrate their last DOCSIS customer before making the change.

    2. Avatar photo anonymous says:

      From the VM forums, where posters say they are staff, it isn’t happening anytime soon as they have majority on HFC and they don’t want to make HFC network look too bad at this point. I suspect that once the tip to more XGS-PON then they will change. Yes, I agree though, they could simply customise the output for those areas and offer different packages to HFC, but this is VM – sense and what they do….

  13. Avatar photo Just a thought says:

    When does Competition and Mergers kick in? If OR decided to buy up some AltNet that had covered a hard to reach area, would they be stopped? How big does VM get before their purchases are considered a risk to competition?

    1. Avatar photo mike says:

      There’s no competition in my area of Norwich.

      It’s 20Mbps on OpenReach, or 1Gbps on Virgin.

      CityFibre just stopped their rollout, and now Virgin have bought Upp which was about ready to start competing with them.

    2. Avatar photo anonymous says:

      You’re stuffed then. Welcome to VM contracts, price gauging, and erratic customer service response, or, if already a VM customer on HFC, a continuation of this with no hope of improvement…

    3. Avatar photo mike says:

      Already a VM victim because my only other option is 20Mbps on OpenReach. CityFibre and Upp were my only hopes to escape the abuse.

  14. Avatar photo Fibre D says:

    As a build partner of Nokia/Upp on the Norwich build, I wonder how this acquisition will affect the contracts in place going forwards?

    1. Avatar photo XGS says:

      Going by https://www.nexfibre.co.uk/nexfibre-acquires-altnet-upp-to-accelerate-fibre-rollout-by-175000-homes-in-partnership-with-virgin-media-o2/ and specifically ‘Over the next 12 months Virgin Media O2 will proceed with completing Upp’s build currently in progress; integrating and aligning Upp’s fibre network and systems; and offering Upp customers a wide range of Virgin Media O2 services.’ it isn’t looking too good.

  15. Avatar photo Sonic says:

    > Building on the strong foundations that exist today, Virgin Media O2 and nexfibre have a clear strategy in place to be the biggest fibre challenger in the country, offering greater choice and competition to the BT status quo.

    Right. This is the company that refuses to cable up my house (and 5 others on my street) despite the fact that every other house is already wired up to their network. Useless bunch.

    1. Avatar photo XGS says:

      Yup. Not passing 5 premises when you’ve a 16 million premises passed network is a killer for sure.

    2. Avatar photo Sonic says:

      16 million premises passed – how does that help me exactly?

    3. Avatar photo Me says:

      @sonic – It doesn’t and neither VM or many others care. They don’t intended to cover 100% of the country.

    4. Avatar photo Jon says:

      It doesn’t help you – but that’s not their problem. They build the network speculatively, and as such some spots get missed. There will be a reason for this – either a private road, private land, lack of wayleaves, or something else.

      If you’re in such a spot, all you can do is contact them to try and find out why (offering to put up some or all of the cost of installation will likely help here).

      Only BT Group (and by extension Openreach) or KCom are required in any way to serve your address.

    5. Avatar photo XGS says:

      Doesn’t help you at all. Neither does it mean they’re a useless bunch. There are many other reasons someone may throw that insult at them.

  16. Avatar photo Former Upp employeee says:

    Terrible news for Upp employees and customers.

    Pack your bags and run.

    Also gutted as Upp was just about to go live in my village. Looks like I’m stuck with Virgin either way now

  17. Avatar photo Alan Duberry says:

    Upp was my only hope after OpenReach missed 7 properties in our town centre. It looks like they’ve completed the streetworks but god only known when it will be able to be ordered (through VM02 I assume).

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