Virgin Media O2 owners plan to contest UK watchdog's objections to Netomnia takeover

what happened

The owners of Virgin Media O2 said on Tuesday they would not put forward remedies to address objections from the UK's Competition and Markets Authority to their £2 billion ($2.7 billion) purchase of the fibre network Netomnia. Instead, they will challenge the regulator's reasoning, according to Reuters. Earlier this month the CMA said Nexfibre's deal could significantly weaken competition and that it preferred a sale to rival CityFibre.

Nexfibre, a joint venture of Virgin Media O2's co-owners Liberty Global and Telefonica together with infrastructure investor InfraVia, agreed in February to buy Netomnia, the second-largest alternative fibre operator in Britain. In its response, Nexfibre called the CMA's interim report 'fundamentally flawed', arguing its conclusions rest on hypothetical scenarios that do not match the commercial and financial reality of the UK fibre market. It also said assuming CityFibre would buy Netomnia is not credible, and that the billions of pounds of investment the deal would unlock would not simply happen anyway.

why it matters

The dispute matters for the whole telecom sector. The CMA's view that a CityFibre-Netomnia combination would create a stronger rival to BT's Openreach network and the enlarged Nexfibre and Virgin Media O2 business sets a benchmark for how regulators assess fibre consolidation. The outcome could affect Liberty Global, Telefonica and BT, with Openreach being the market leader.

market impact

UK telecom: a prolonged regulatory fight adds uncertainty for Liberty Global, Telefonica and BT shares

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