New UK Fibre Company in the Works

Competition in the fibre broadband market is about to turn serious. Expectations of a shift in the balance of power have been raised by announcement of a joint venture between Liberty Global, the owners of Britain's Virgin Media O2, Spain's Telefonica and the French investment firm InfraVia Capital Partners.

The new partnership, so far unnamed, has committed £4.5 billion to the project, which will involve the roll-out of fibre to as many as 5 million UK homes in greenfield areas by 2026. The scheme also has the potential for expansion to an additional 2 million homes. If the upper target is met, this will represent 25% of all the households in the UK, which is in addition to the 60% of premises already served by Virgin Media.

Until now, BT has been overwhelmingly dominant in providing the UK's wholesale connectivity network. Virtually all ISPs are reliant on BT Openreach to connect their customers. Virgin Media is the highest profile exception to this status quo, opting to lay their own cables even though this has inevitably restricted their reach. Other local companies such as Trooli have followed a similar path but often use the BT network for the final wired connection.

Liberty Global and Telefonica will share 50% of the JV with the other half held by InfraVia. The network will build on availability in places where Virgin already has a presence and will also target entirely new areas. The long-term objective is to attract third-party wholesale clients to make this is a viable alternative.

Meanwhile, BT is continuing to invest heavily into its own network, hoping to offer fibre to 25 million premises by the end of 2026, but the announcement of the Joint Venture led to a 4.4% fall in the BT share price. The prospect of genuine competition promises to change the industry for good.

The UK has for years lagged behind the rest of Europe in the provision of high-speed internet access, out-performed by everyone from Germany to Latvia. This has proved detrimental to economic growth so the government now envisages the achievement of national full-fibre broadband coverage by 2033.

Lutz Shuler is the CEO of Virgin Media O2. He suggests that the new network will be the gold-standard for fibre, connecting 23 million premises by 2028. He comments: "We will have two nationwide fibre networks. I think that's fantastic for the UK."

The partners in the JV bring considerable experience in this sector. The chairman and CEO of Telefonica, José María Alvarez-Pallete, said: "Telefónica has a recent track record of successfully developing broadband connectivity in many markets through strategic partnerships."

InfraVie has been a major investor in digital infrastructure for over ten years. Its CEO and founder, Vincent Levita, added: "The combination of our respective expertise in fibre network deployment, financing and operations in the UK, together with VMO2's industrial scale and network construction know-how will be key to creating the undisputed second national fibre network in the UK providing access to broadband connectivity to millions of UK households."

The deal is subject to regulatory approval but all parties expect it to be finalised during Q4 of 2022. The JV is already in talks with providers like TalkTalk, Vodafone and Sky about providing wholesale access.