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The regulator is exploring whether the £2 billion merger between the fibre network players will harm competition
The Competition and Markets Authority (CMA) has announced it will move directly to the more in-depth Phase 2 of its competition review into the of nexfibre–Netomnia merger.
The decision follows requests from both nexfibre and Netomnia, both of whom are keen to see the process progress as quickly as possible.
“We requested a fast-track to Phase 2 to get to the right answer faster; ensuring due process, while recognising urgency. We look forward to continuing our constructive engagement with the CMA,” said Rajiv Datta, CEO of nexfibre. “This deal would create the scaled, sustainable alternative to the BT Openreach monopoly, something the UK market still lacks. Every day of delay reinforces the incumbent’s advantage and slows the progress of genuine competition.”
The £2 billion merger, announced in February, would see InfraVia, Liberty Global, and Telefónica – owners of Virgin Media O2 (VMO2) – acquire Substantial Group, the owners of fibre wholesaler Netomnia and ISP brand You Fibre.
Netomnia would be merged with the parties’ existing joint venture, nexfibre, bringing together two fibre networks planned to span a combined 8 million premises by the end of 2027.
This new entity – when considered alongside VMO2’s roughly 5.7 million premises passed with fibre and 10.5 million with legacy hybrid fibre coaxial technology – would create a ‘scaled, financially secure challenger’ to BT (Openreach) and unlock £3.5 billion of investment in the UK market, the companies claim.
The tie up immediately triggered a review from the CMA, with preliminary stages inviting the industry to comment on the deal beginning in April. This was expected to be followed by a Phase 1 review, a process typically taking around 40 days and designed to identify any obvious risks to competition.
Given that the tie-up in question combines two of the biggest players in the market, it seems highly unlikely that the deal would have passed this stage, hence it makes sense for the network operators to ask for an acceleration to the more detailed Phase 2.
The largest point of criticism of the deal comes from the not-insignificant overlap of Netomnia’s fibre footprint and that of nexfibre. According to a report from PointTopic, around 832,000 premises could overlap, leading to “reduced infrastructure-level competition, less aggressive pricing or promotional activity over time, lower pressure for network upgrades and service innovation, and reduced long-term competitive tension between independent fibre builders.”
CityFibre, which had been attempting to acquire Netomnia itself, has argued that the deal will “significantly reduce competition and the choice available to consumers, as well as force hundreds of thousands of Netomnia customers back to VMO2”.
These concerns are unlikely to sink the deal entirely but could prompt remedies from the CMA, including stronger wholesale pricing requirements that will ensure prices are controlled for customers.
“A timely resolution is likely to be important given risks of finance deals dissipating, and even sellers’ heads being turned by alternative offers from CityFibre, although securing the finance to beat the nexfibre offer won’t be an easy feat,” Karen Egan of Enders Analysis noted in a LinkedIn post.
The deadline for the Phase 2 review is mid-December, though discussions about potential remedies could prolong the process.
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