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Hot on the heels of announcing a tough second quarter when it experienced overall falling revenues and customer losses, but with its UK subsidiary Virgin Media O2 (VMO2) showing a return to profitability, Liberty Global has revealed that it is teaming with fellow VMO2 owner Telefónica and specialist infrastructure and technology investment firm InfraVia Capital to build a new fibre network in the UK.
The joint venture – 50% owned by Liberty Global and Telefónica, and 50% owned by InfraVia Capital Partners, and which is expected to come together by the end of 2022 – will construct and operate a wholesale fibre-to-the-home (FTTH) broadband network of up to seven million premises that will not overlap with VMO2’s existing network and recently announced fibre upgrade project to create a UK FTTH footprint of up to 23 million premises.
In addition to providing a range of technical services, VMO2 will be the anchor wholesale client of the joint venture (JV), which will roll out fibre served by VMO2’s network. The joint venture will also have exclusive access to VMO2’s construction expertise and substantially all new build activity at VMO2 will be migrated going forward.
Coupled with its own fibre investments to upgrade its existing 16 million premises network, this will expand Virgin Media O2’s gigabit footprint to around 80% of the UK upon completion. The joint venture will also seek to attract additional third-party wholesale clients. It will target homes across the UK, both adjacent to the existing Virgin Media O2 footprint and new areas.
The business plan for the initial roll-out of five million homes by 2026, with the opportunity to expand to approximately two million more homes, envisages an investment of approximately £4.5bn, which includes spending related to the roll-out, connection capital expenditure (capex) and other related setup costs.
The three partners will fund their pro rata share of equity funding for the build, up to £1.4bn in aggregate, phased over four to five years. In addition, the joint venture has obtained £3.3bn of fully underwritten debt financing from a consortium of financing banks, including a £3.1bn capex facility. As part of the transaction, InfraVia will make certain payments to Liberty Global and Telefónica, a portion of which will be linked to the progression of the network build-out.
For Liberty Global CEO Mike Fries, the deal between the two operators and InfraVia is a “landmark agreement” that will not only expand the company’s FTTH footprint to millions of new UK homes, it will also create “the undisputed” second national fibre network in the UK.
“VMO2 has already committed to upgrading its entire existing 16 million footprint to FTTH,” he remarked. “This JV will take our aggregate FTTH footprint to up to 23 million homes, reaching around 80% of the UK. VMO2 will bring significant build expertise and will benefit from a meaningful off-net growth opportunity, and, as the anchor client, will support attractive returns for the JV – a winning combination. Finally, we are very excited to be working with InfraVia, who we already partner with in Germany, and welcome the expertise they bring to the JV.”
InfraVia 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.
“Attracted by the long-term trends of ever-increasing data usage and increased need for home connectivity, this would represent our fifth investment in fibre network deployment in Europe through strategic partnerships.”