Brit competition cops fast-track £2B borging of Netomnia into Openreach challenger

Britain's competition watchdog wants to cast a close eye over the proposed takeover of Substantial, owner of Netomnia, by a consortium that includes Virgin Media O2 owners Liberty Global and Telefonica. The Competition and Markets Authority (CMA) has referred the acquisition for an in-depth investigation under its fast-track procedure at the merging parties' request. It notified the parties earlier this week that it was launching an inquiry, and today's decision means it is fast-tracking the case to Phase 2 rather than conducting a full Phase 1 assessment. The inspection will determine whether it would lead to a "substantial lessening of competition" in the market for fiber broadband networking. The deal was announced in February, when Liberty Global, Telefonica, and InfraVia disclosed their intention to snap up Substantial Topco Limited (Substantial) in a transaction that valued it at 2 billion ($2.65 billion) through their existing joint venture company, nexfibre. Liberty Global and Telefonica are the joint owners of Virgin Media O2 and, together with InfraVia, joint owners of nexfibre. The trio said at the time they were looking to combine Substantial's fiber network concern (Netomnia) with nexfibre. Along with the 2.1 million premises served by Virgin Media O2, this would create a challenger to BT Openreach with a full fiber footprint of around 8 million premises by the end of 2027. The resulting entity would provide internet service providers with "a highly attractive wholesale alternative to the incumbent," the trio stated. The CMA will now test those claims against the possible loss of competition resulting from the consolidation, as it would reduce the number of fiber network operators and create a giant with the scale to take on BT, the UK's former state-owned telecoms monopoly. This is not the first time VMO2's owners have attempted such a move. Back in 2024, Virgin Media wanted to spin out its fixed-line broadband networks into a separate business (provisionally named NetCo) that would be open to other internet service providers for the first time. This proposal did not include nexfibre. But this ambition was canned last year amid an ongoing review at Telefonica that aimed to deal with the company's debt burden. To complicate matters, Liberty Global also has a 5 percent stake in another British telecoms operation, Vodafone, which it acquired three years ago, making for a tangled web of ownership in the UK comms market. The CMA investigation has a statutory deadline of December 15, 2026, which means its report will be out just in time to deliver a nice Christmas present for the investors - or perhaps not. Rival biz CityFibre is one organization opposed to the merger. "VMO2/nexfibre's planned acquisition of Netomnia would remove a successful challenger and reduce choice for consumers. With 80 percent overlap between the two networks, the deal raises significant questions and the CMA is right to take an in-depth look at its impact on UK digital infrastructure and the competition that policymakers, regulators and the altnets are working so hard to establish," commented CEO Simon Holden. However, CCS Insight director of Consumer and Connectivity Kester Mann told The Register that further consolidation within the UK telecoms market is inevitable. "With dozens of altnets in the market, including many that are struggling, further consolidation is inevitable. After many likely rounds of future deals, the market may eventually evolve into one with three major infrastructure providers, mirroring the situation in the mobile industry," he said. "But amid concerns over competition, it is right that the CMA carefully investigates the deal. It is unlikely to be blocked but there is a chance that some remedies are put in place to allow it to proceed." "The move straight to Phase 2 is both logical and expected, fast-tracking an investigation that would unlikely have been approved at the first stage." (R)