Netomnia Agree UK Broadband Merger Deal with Owners of Virgin Media O2 UPDATE
Alternative network operator Netomnia (Substantial Group), which has deployed their own full fibre broadband (FTTP) network to cover 3 million UK premises RFS (inc. 445,000 customers), have today confirmed that they’ve been acquired by the owners of Virgin Media (O2) and nexfibre (i.e. InfraVia, Liberty Global and Telefónica) for £2bn. But rival bidder CityFibre may yet raise a competition complaint.
At present Virgin Media (O2), which is controlled by Telefónica UK and Liberty Global as part of a 50:50 Joint Venture (JV), operates a gigabit-capable fixed line broadband network that covers over 16 million UK premises (mostly in urban areas). The network itself reflects a mix of hybrid fibre coax (HFC) and full fibre (FTTP) connections, although they’re aiming to upgrade all of that to full fibre (costing c.£100 per premises).
In addition, Telefónica UK, Liberty Global and InfraVia Capital also jointly own the semi-separate nexfibre business, which has rolled out an open access (wholesale) full fibre network to 2.5 million premises in areas NOT currently served by Virgin Media’s own network. But at the time of writing, the only two retail ISPs selling services via nexfibre all share some of the same parentage (Virgin Media and giffgaff).
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As previously reported on these pages, VMO2’s parent – Liberty Global – and CityFibre have spent the past few months battling over a major network consolidation deal to acquire Netomnia / Substantial Group (here and here), which could have a notable impact upon the competitive landscape. The big news today is that InfraVia, Liberty Global and Telefónica have won the competition.
Netomnia is expected to have more than 3.4 million FTTP premises and over 500,000 customers by deal completion. The acquisition will be made through the parties’ joint venture company, nexfibre, and will unlock £3.5 billion of investment in the UK market (this figure reflects the projected nexfibre capex spend between 2026-2040 as a result of the transaction).
Joint statement – Vincent Levita, Founder & CEO of InfraVia Capital Partners, Mike Fries, Chairman & CEO of Liberty Global, and Marc Murtra, Chairman & CEO of Telefónica, said:
“By bringing our strengths together, we are creating a scaled and financially secure wholesale fibre challenger to BT Openreach – one that will enhance competition, strengthen the UK’s digital infrastructure and deliver greater choice and quality for consumers and businesses.
This transaction unlocks £3.5 billion in international investment and reflects our shared confidence in the UK as a highly attractive market for long‑term investment, supported by the government’s economic policies. We are committed to accelerating full‑fibre coverage and helping ensure the UK remains competitive and ready for the future.”
Jeremy Chelot, Group CEO of Substantial Group, said:
“This landmark transaction with nexfibre represents the natural evolution of the UK’s fibre market. Consolidation has been inevitable, and this deal creates the scaled, sustainable platform needed to drive genuine wholesale competition. Importantly, our retail brand, YouFibre, will remain post-close, ensuring our customers continue to receive the same trusted service they know today, while benefiting from the financial strength and infrastructure scale this combination delivers. This is about building a stronger future for UK fibre.”
As part of the deal, nexfibre will sell Substantial Group’s retail ISP businesses, including the YouFibre and Brsk brands, to VMO2 for £150m “ensuring customers continue to receive the same trusted service they know today“. In addition, nexfibre said they will finance the FTTP upgrade of the 2.1m VMO2 Hybrid Fibre Coax (HFC) homes (i.e. those that are adjacent to the Netomnia footprint) with VMO2 paying wholesale fibre access fees on its customers in those homes as the fibre becomes available (with the “majority expected to be ready by the end of 2027“).
In exchange for the wholesale traffic commitment on the 4.6 million premises, VMO2 stands to 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 also provide a full suite of managed services to nexfibre – including construction – in return for ongoing management and construction fees.
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On the surface, such a deal would appear to be of debateable merit. Netomnia’s fibre has already overbuilt a good chunk of Virgin Media’s existing network, although there’s only a smaller overlap with nexfibre’s FTTP. VMO2/nexfibre would thus gain some additional FTTP coverage through the deal and a nice boost in customer numbers, but whether that’s enough to justify the price tag is another question. The faster upgrade path in HFC areas is a benefit too, but it’s not like VMO2 were spending much on those in the first place.
However, the buyers also gain by removing a rapidly rising competitive player in the alternative network space, which at the same time prevents the market’s largest altnet – CityFibre – from securing its own merger with the Netomnia and thus growing the scale it needs to properly compete; this alone could be seen as a win for VMO2, albeit a potentially expensive one.
On the flip side, a sizeable portion of Netomnia’s customer base will have chosen them for their faster speeds, lower pricing and to escape from legacy incumbents like Virgin Media O2 and their cycle of inflation busting mid-contract price hikes. Suffice to say that most of the feedback we’ve seen from earlier reports suggests that many subscribers will be deeply unhappy with VMO2 gaining control.
On this point it’s positive that the YouFibre brand and its current services are to be maintained (seemingly adopting a similar approach to giffgaff), although over time we can’t help but wonder how their service and prices may change (i.e. will VMO2 be able to resist importing their old habits to the same base). A question mark also remains over the impact upon Netomnia’s pool of third-party ISPs at wholesale (e.g. Aquiss).
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For consumers, a deal between Netomnia and CityFibre is likely to have been much more palatable, which is due to the limited level of network overbuild and their shared position as lower cost broadband disruptors; this would have made for a more competitive market. But in the end, CityFibre simply struggled to deliver the most attractive offer.
The big question now is over how the Competition and Markets Authority (CMA) may view the deal, although we suspect they’d be unlikely to view VMO2 and nexfibre as being completely separate. The CMA is thus likely to consider the wider competitive ramifications of such a major operator buying into control of the altnet space like this, and our sources suggest that CityFibre are prepared to raise a competition complaint.
However, given the CMA’s recent flexibility toward big telecoms mergers (e.g. Three UK and Vodafone), it’s reasonable to expect that they may still allow the deal to go through – possibly with some concessions. Quite what form those concessions, if they do indeed materialise, may take is as yet unclear. But we wouldn’t be surprised if it included stricter wholesale requirements for Virgin Media’s consumer focused broadband network, which is something the operator has already been trying to develop (here).
Completion of the transaction is subject to customary regulatory approvals and is expected by Q3 2026. But after that will come the long, costly and complex process of network integration work.
UPDATE 2:13pm
CityFibre’s boss has responded to the deal.
Simon Holden, CEO of CityFibre, said:
“There’s an 80 percent overlap between these two players and, if the deal goes ahead, it would significantly reduce competition and the choice available to consumers, as well as force hundreds of thousands of Netomnia customers back to VMO2. Given the scale of this overlap, the CMA must thoroughly examine the deal.
Competition has driven lower prices, faster speeds and better services and this deal risks re-establishing an ineffective duopoly of BT and VMO2 and undermining the significant progress the UK has made.”
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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Have to feel they’re paying to take a competitor out the market rather than because they see the network as being valued at that number – that’s a lot of money per premise passed.
Maybe there will be some pressure for VM to be forced to wholesale now, I’m sure the regulators are all over it.
This transaction allows the investment program to be refocused, so there are savings to be had.
This is exactly what they doing, its considerably more spend than just rolling out FTTP to same areas.
They killing of both CityFibre and Netomnia in these areas as VM’s interest was born when they learnt of CityFibre and Netomnia talks.
So that’s why the brsk fellas are making people redundant – to save their own skin when virgin have to look at resource
This is normal, BRSK and Youfibre merged and you’ll end up with losses because they’re not going to end up with multiple HR, multiple IT, multiple support functions etc. etc.
Any redundancies at Brsk would have arisen from the acquisition by Netomnia.
Changes in resourcing associated with this transaction will come later.
ironically i’ve seen more netomnia staff getting the redundant boot than brsk staff
NOOOOOOOOOOOOOOOOOOOOO 🙁
RIP Netomnia and YouFibre. That means I won’t be moving to their network because a) they have never rolled out to us and b) I want nothing to do with Virgin Media. Looks like I’ll staying with BT for the foreseeable future.
If you can’t beat them, buy them.
I wonder how many Netomnia end users will scatter at this news. One thing that is certain, consumer price rises are coming as you don’t spend £2Bil to without a plan to recoup it.
Well done, this is a good move.
This development also lends support to the case for deregulating Openreach and BT in the forthcoming Ofcom regulatory period..
“In addition, nexfibre said they will finance the FTTP upgrade of the 2.1m VMO2 Hybrid Fibre Coax (HFC) homes (i.e. those that are adjacent to the Netomnia footprint)”. So in effect Nexfibre will become the wholesale provider for the whole network once it has been upgraded to FTTP and VMO2 will be the retail ISP. Pretty much what I suggested may happen when this story first surfaced a couple of weeks ago.
so does this mean Nexfibre will ofefr 5gbps and 8gbps as what youfibre are offering?
I assume then this network will be wholesale or will youfibre become VMO2?
interesting times ahead.
I didn’t really understand that statement. Do they mean that in areas where Netomnia is available when an upgrade from HFC to fibre is ordered it will be handled by Nexfibre rather than VM directly? Maybe I’m confused by the word adjacent.
Jeremy,
You have repeatedly positioned yourself as a champion of pro-competitive consolidation in the UK broadband market. At Connected Britain 2025 and elsewhere, you spoke about building scale in a way that would increase infrastructure competition and deliver tangible benefits for customers. You framed Netomnia as part of the solution – not part of the problem.
This transaction with Virgin Media O2 directly contradicts that narrative.
Instead of strengthening independent network competition, it consolidates further market power into one of the UK’s largest operators. That reduces long-term infrastructure choice in the very areas where Netomnia was presented as a competitive alternative.
For years, you argued consolidation must serve customers and protect competitive tension. This deal weakens that.
You spoke about doing consolidation differently. This looks like conventional absorption by an incumbent.
So the question is simple: were those previous statements about protecting competition conditional on remaining independent, or were they strategic positioning ahead of an exit?
Because from where many of us in the industry stand, this outcome appears fundamentally at odds with the principles you publicly championed.
Do you think he actually cares when he’s 30 million quid up?
It’s because he’s full of it, and Money.
He’s said whatever he need to to get that paper, and becomes irrelevant in the process.
I called it years ago.
£££ talks
Perhaps your issue here is believing that Jeremy Chelot owned the entirety of Substantial / Netomnia / YouFibre / Brsk, and as such had final say in any of this.
From VMO2s announcement of this deal:
“InfraVia, Liberty Global (NASDAQ: LBTYA, LBTYB, and LBTYK) and Telefónica (TEF) have announced an agreement to acquire Substantial Group. Founded in 2019, Substantial Group, OWNED BY investors Advencap, DigitalBridge and Soho Square Capital”
Jeremy is not mentioned here and I cannot see him listed as a Director of any of these businesses.
When ISPreview published on this story a few weeks back people again called out Jeremy for selling out and it was rightly pointed out then that he would not be the decision maker in all of this and Netomnia was not a charity!!!
So he can have his principled view on how things should play out; doesn’t meant the money men need to agree!
The staff can’t seem to take a break, all the redundancy survivors from the past few months will have to go through redundancy again
I guess all those 8 gig services (plus the couple of people with 50GPON) didn’t pay the bills in the end.
“our retail brand, YouFibre, will remain post-close, ensuring our customers continue to receive the same trusted service they know today, ”
Didn’t people on this website’s forum note that their “support” teams were using some form of generative AI? In that regard perhaps a VM takeover is an improvement!
As I said on the last article. I wonder if the CMA will finally take notice of the rather incestuous relationship between VMO2 and Nexfibre, noting the supposed overlap between VMO2 and NO, and acting accordingly. I’m surprised the shareholders are happy to spend so much on a firm that has reportedly made liberal use of Openreach PIA.
I agree with the above commenter in that this gives Openreach even more reason to seek further deregulation.
Just seen your point about that youfibre will remain.
considering Nexfibre only carries VM02 and Telefonica’s budget brand giffgaff, I suspect those users will migrate over – can’t see VM doing all that work for youfibre customers to stay put…
CityFibre aquiring them made more sense, but didn’t have the liquid assets necessary to do it.
Still, £2bn is a wild number. I suspect that’s a massive over-valuation, but then, Virgin aren’t aquiring them for the assets, but to take a piece off the board.
Any Netomnia customers planning to jump ship first chance they get?
When they contract runs out on Brsk yes – I still have FTTP thank goodness but it’s easy to re activate anyway
VM02 nexfibre etc dont really want netomnia… but they dont want anyone else having it either ! thats the issue…
I’ll be gone but unfortunately not until January 2027, unless of course I move house to an unserviced area.
Bye bye YF..I will be off at the end of my current contract. What a shame
Now it’s time for the corrupt CMA to let us all down once again. Absolute joke of a “regulator” only thing they regulate is how much money is put into their pockets by these greedy businesses. I have zero faith they’ll stop this merger.
It would definitely count as a significant reduction in competition in the areas in which these two companies operate but not very significant nationally because Netomnia has a tiny market share. It’ll be interesting to see what view the CMA take on it. I always thought market power in this type of industry should be judged at a more local level.
So disappointed.
For years VM was the only option at my address as OR are stuck on very long FTTC lines delivering rubbish speeds.
VM don’t care, price it how they like, take the network down for hours on end because they need to do maintenance. They’ve been a nightmare and always will be.
Netomnia came along and it was a god send.
OR FTTP still isn’t available so my address is going back to being VM only. Amazing. High prices, rubbish CS and unreliable Broadband.
Would be a very wise move for customers of Netomnia /Youfibreto to extricate themselves from their present contracts as soon as is reasonably practical!