Telefonica CEO – Virgin Media Scrap UK NetCo Broadband Wholesale Plans
The CEO of Telefónica, Marc Murtra, has clarified his own recent remarks and revealed that Virgin Media and O2’s (VMO2) plan for opening up their fixed residential broadband ISP network in the UK to wholesale (here) – via a new entity (NetCo) – is now “stopped” and not merely “on a pause” as initially indicated.
In case anybody has forgotten. The joint ventured between Liberty Global and Telefonica – VMO2 – initially appeared to be progressing normally at the start of this year and was on course to open up their network to rival ISPs via the new NetCo in H1 2025 (here).
On top of that, the semi-separate £4.5bn nexfibre project by Telefónica, Liberty Global and InfraVia Capital Partners (here) was also making progress on its mission, which aimed to extend FTTP broadband coverage to 5 million premises by the end of 2026 – focused on areas beyond Virgin Media’s existing network.
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However, as previously reported (here), the nexfibre build recently suffered a big hit after debt stricten JV partner Telefonica launched a Strategic Review. Not only did this appear to pause Virgin Media’s (O2) own plans for opening up their existing broadband network to wholesale via a new NetCo company (here), but it also caused nexfibre to scale-back its FTTP coverage target for 2025 to 2.5 million premises (here) – roughly 500k premises less than originally expected.
The strategic review thus cast a cloud of significant uncertainty over the future of VMO2 in the UK and this week’s results announcement (here) provided no further updates. But this week also saw Telefonica publish its latest results too, and the company’s boss initially appeared to confirm that the NetCo might still be progressing (credits to Olaf for the tip).
Marc Thomas Murtra Millar told investors:
“So with regards to the future regarding data centres or opportunities like that, that is part, of course, of the strategic review. You mentioned the NetCo, the U.K. NetCo is not paused, and it’s not part of the strategic review. That is a decision we made and announced, and that has to do with our industrial strategy and industrial way of working.
The suggestion that the NetCo is not paused or part of the Strategic Review seemed to conflict with earlier indications, but also gave the impression that it was still progressing. Unfortunately, Murtra later clarified his remarks by telling Reuters that the NetCo “project is stopped” and not merely paused (i.e. scrapped).
Prior to all this, VMO2 had been attempting to raise £1bn to support their NetCo plans (here), but that seemed to be struggling to reach a final agreement and of course now it never will. Furthermore, despite VMO2’s plans to go wholesale being telegraphed for long in advance of the NetCo itself being formalised, the project had struggled to attract any support from major rival broadband ISPs.
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Potential ISP partners would have been looking to be treated fairly (wholesale agreements), which is always a tricky thing to balance vs the desire by some for exclusivity agreements, and Virgin Media’s mix of XGS-PON / RFoG based full fibre (FTTP) and its legacy DOCSIS 3.1 (Hybrid Fibre Coax) network also made for an awkward combination. FTTP will eventually replace all of that, but not until 2028 and this too may now be in doubt.
At the same time the NetCo would need to be competitive with the dedicated wholesale platforms from larger providers like CityFibre and the regulated Openreach, while also making it all as easy to harness as possible. One potential issue here is that Virgin Media’s own retail broadband pricing, particularly its post contract rates, are still relatively high compared to a lot of other FTTP providers and that might not have worked as well in today’s competitive market – a hard thing for VMO2 to balance (retail vs wholesale).
Quite where VMO2 and their parents go from here is unclear and subject to the ongoing Strategic Review. Liberty Global are due to publish their own results today, which may help to shed some more light over the issue. VMO2 itself declined to comment on this report, but did say that they continue to deploy fibre at scale and now have a fibre footprint passing more than 7 million premises with 18.5m all able to access gigabit speeds and above (combined VMO2 and nexfibre networks).
One final point to make is that none of the above should be confused with VMO2’s business wholesale division, which offers dark fibre and optical solutions to a range of carriers, critical national infrastructure players, cloud service providers and channel resellers.
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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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I’m just hoping at this point that Giffgaff becomes a good alternative to VM itself.
My wishlist being that they’re slightly cheaper, have a separate ONT to easily allow for different routers, still offer symmetrical gigabit speeds and maybe a bit less of a PITA to deal with.
Well either this or some better alt-net comes to my area.
Note: I’m aware of the trial
I think it is also of note that investment in the wireless (02) side of the business is progressing, while it is the fixed line (Virgin Media) side that has been stepped down.
Until recently, I was of the impression that it was Telefonica that might be reconsidering its commitment to the UK joint venture after their announcement of the global strategic review, but what if all along the doubts have been originating from Liberty Global?
Doubts are all from Telefonica.
Liberty Chief Exec called the decision to pause Netco ‘Highly unfortunate’ only a few weeks ago.
There has been a change in management at Telefonica over the last six months and the signals from this week’s results call of their thinking are that a close relation between networks and retail is a more efficient model than separate vehicles.
I think this is bad news for Nexfibre. If a 25% shareholder is getting cold feet, it will not encourage other players to sign up to the platform.
@FibreBubble:
Liberty Global is also cutting back. Telefonica, meanwhile, has indicated that the UK is one of the few markets it will be concentrating on. At the moment it is speculation, but there is more to the story than is surfacing in public.
as a giffgaff trialist, install soon, Im rather hoping it continues and also becomes an established provider but given this news, who knows what will happen.
At present giffgaff’s trial only exists in nexfibre areas, so nothing will change in that respect. The fact that giffgaff are also part of the same parentage also means they’ll probably be sticking around.
VMo2 are sleepwalking into a doom loop of long term decline.
Their two networks are notable for poor data coverage (mobile) and unreliability and customer service issues (fixed).
On the mobile side VMo2 doesn’t have the financial muscle to invest at the scale needed to compete with the newly merged Vodafone3 or EE.
On the fixed line, in areas where consumers have a choice of Virgin HF Coax or FTTP from Openreach or Altnets, they consistently choose the alternatives.
On my street based on the number of new Openreach Toby boxes, around 10% of the street has switched away from Virgin in the 2 months since FTTP became available. Looking at the roadworks tracker for the next month and there’s around the same again. Anecdotally people’s main reasons for switching to FTTP are network reliability then cost.
Virgin Media’s network is unreliable and compounded by abysmal customer service and price gouging when contracts expire.
Unless VMo2 increase their investment in the Nexfibre rollout they will continue to lose market share and revenue – and be forced into price cutting to protect the existing customer base.
so are openreach only installing the toby boxes when a customer orders fttp?
Spot on. I’m sick of the seemingly millions of different prices VM charge. ‘My’ price for 1G is a fiver a month less than a mate 2 streets away buying the same in the same week.
We both went through the irritating retentions sub-continent dance, wasting an hour of our time and VMs.
Just publish a price, and let us lock in at a *fixed* price for 3 or 4 years.
I’m sick of having to talk to them – the service here is generally tolerable, and i’ve a 4G backup good enough for a teams call or HD streaming when it breaks.
@clive peters: ln my experience fitting Toby boxes only after a customer has taken out a contract would be unusual. Doesn’t happen in my neck of the woods, only sometimes when a property has been missed for one reason or another, after an area rollout.
@Fibre Scriber, I think Richard Branston possibly means wall splicing boxes (CSPs), RB can you clarify whether you mean the grey wall boxes or the Toby Boxes which are typically installed in the pavements just outside the property?
If it’s a formerly DiG area they often now build the drop after the order is placed. Have to build a swept T and drop from duct running past to the property.
I work installing for an altnet. Every other customer is moving away from VM. When VM installed in my area recently, it was coax. The next town along had nexfibre. Weird to build an inferior service when the project to upgrade had already begun. After 18 months. Poor service and a huge price hike, i was gone. I also have a sky mobile, using o2 and its mostly rubbish. 4 bars 4g no Internet connection. I also have a honest sim, uses o2/three/ee….frequently gets better service on o2 than sky, makes me think there’s a conflict of interest with sky/vm
@Polish Poler: Just remembered, a row of 5 houses in an estate where they were originally steel wire armour, Toby boxes were installed individually as the residents changed over to FTTP when their contracts expired. So as you say, it does happen. Thanks for bringing that back to memory, like to be accurate when commenting. 🙂
VM seems to be on download slope right now. Last time I was visiting friends in Swansea I was amazed to see how many Openreach splicing boxes there were despite VM being there for years & now Netomnia are there too. Maybe Openreach AND the altnets will end up as net beneficiaries of a VM decline.
I agree with Big Dave for the main part (and strangely have a on a few articles).
In my opinion, if you only have a choice of BT FTTP or VM, I’d go with the superior asymmetric BT FTTP service, even though NexFibre does have a symmetric option. The lack of modem mode to use your own router on NexFibre, because of the Hub 5x is dreadful, and they need to feel heat on this and the ridiculous pricing regime they have. If you have a symmetric ALTNET however, I’d go with that still.
@Big Dave: That’s right, the Toby boxes are black rectangular and generally only a pull through, being installed, generally on the footpath, 12 inches deep. The older CSP splice box is grey approximately 6 inches square and mounts on a outside wall. The new smaller splice box is grey and is about 4 inches by 4.5 inches. I believe I sent you a picture link of a inside splice tray at one stage.
the differences between “VM” FTTP and “Nexfibre” FTTP do seem to be rather confusing. What’s the business case for offering wholesale on one network but not the other?
Why are VM areas treated differently even though they’re being built at the same time as the Nexfibre network, presumably to similar designs and with the same vendors (we know the new Giffgaff ONT has a model name with an -LG suffix, ie Liberty Global)
I remain convinced that they don’t want to outwardly show too much co-operation between the two businesses as it would be an easy target for Ofcom to decree that they have SMP and thus should be subject to Openreach style regulation. Though you could probably make that argument of the existing VM network on its own, or of altnets that have received subsidy
Hi BT Ivor,
Because the HFC side (RF coax mixed with optical amplifiers) is real legacy and a nightmare for VM and would have ISPs claiming service credits/compensation for so many types of faults – SNR, over utilisation, power levels too strong or too low which affects the modem side and its probably just not in a state to wholesale out. Then there is the RFoG network side, equally disturbing as fibre to home then a box to convert back to/from RF. You then lose control of VM handing out routers with the “controlled” DocSIS modems inside as VM never wanted people to be able to buy their own modems or routers with modem inside. It’s always been controlled hardware for access from VM.
Nexfibre was new and easier to design with wholesaling in mind, it’s all IP for a start. They still messed up with native ipv6 and don’t have it.
I didn’t mention HFC. I didn’t mention RFoG.
I am referring to VM’s new “project mustang” XGSPON which seems indistinguishable from Nexfibre’s XGSPON.
Surely it doesn’t matter if they want to? as they’ll just get flagged as a provider with SMP, and OFCOM make them do it?
This all reads to me like Virgin left it too long to start heavily investing in FTTP. They should have stopped rolling out HFC 10+ years ago and now they’re being overtaken by other, smaller providers offering a cheaper and better product.
Virgin’s USP was genuinely better technology than openreach (and thus most competitors), that’s how they could get away with higher prices and terrible customer service for so long. Not any more, the playing field has been levelled and now they’re falling behind.
Liberty and Telefonica now pulling in totally opposite directions. This could be bad news for Nexfibre.
RFoG is FTTP to the omni box on the outside of the building, then back to coax internally. Virgin Media best kept away from, unless you have no other option. Out of contract prices just about double in many cases!
I’m amazed that a strategic shift in abandoning the wholesale market was told to Reuters and not properly communicated. As for why this has happened: Telefónica’s debt burden is so high that further expansion is not deemed suitable. And huge investment would have been needed for a wholesale Netco business even though VM is overbuilding its HFC network with fibre by end of 2028.
From the article that covered this story:
“Telefónica CEO Marc Murtra confirmed the plans have been shelved for good, during the company’s earnings call this week.”
Telefonica has been selling off its South American operations and has generated a significant fighting-fund which could be used to pay down debt or, more likely, to engage in the coming round of consolidation expected to happen in the EU. Telefonica is also still getting significant backing from the Spanish government.
However, Telefonica seems to be waiting on the EU Commission’s decision regarding the consolidation of the EU telecoms market before finalising its plans.
I honestly think VM think it’s still 2019 and they are the only player big in the ultrafast (500Mbps+) retail ISP space! They are a dinosaur, the cable companies are the reason BT didn’t roll out FTTP back in the 80s/90s. (they complained to Maggie who blocked it as BT was still state owned)… They knew then they would struggle to compete against FTTP from BT back then, the fact that in the ensuing 40 years they haven’t prepared for the inevitable is just madness! Talk about a self fulfilling prophecy! If they stopped mucking around with stuff like AI gimmicks, fixed their customer service and tech support, sped up the roll-out of FTTP with an ONT rather than using the hub 5x so folks can use their own routers, they could even offer a wires (ONT) only service (like the amazing Aquiss) for those who don’t want a lacklustre router cluttering up the house. If they can figure out how to be a service provider for the 21st century where they aren’t the only game in town they have a slim chance of survival. Ditch the VM name thought, it’s not got the best name value anymore.