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Virgin Media O2 bags £4.5bn fibre investment

Telefónica and Liberty Global, parent companies of UK provider Virgin Media O2, have reached an agreement with investor InfraVia allowing the companies to set up a new joint venture to roll-out FTTH to greenfield premises across the UK. 

The partnership will initially roll out fibre to 5 million homes that are not currently served by Virgin Media O2’s network by 2026. There will then be the opportunity to expand to an additional c.2 million homes. The business plan for the initial 5 million homes is based on an investment of around £4.5bn, which includes investments related to the roll-out, projected connection capex and other related set-up costs. 

The three partners will fund their pro-rata share of equity funding for the build, up to £1.4bn in aggregate, phased over 4-5 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. 

Liberty Global and Telefónica merged their British operations in 2020, bringing together Virgin Media and O2. The companies will jointly hold a 50 per cent stake in the venture through a holding company, with InfraVia owning the remaining 50 per cent. Telefónica Group’s participation will be held through Telefónica Infra (its infrastructure unit). 

The fibre network will offer FTTH wholesale access to service providers, with Virgin Media O2 acting as the anchor client, entering into an agreement with the venture upon closing of the transaction. 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 per cent of the UK upon completion. In addition, the new company will look for additional third-party wholesale clients. It will target homes across the UK, both adjacent to the existing Virgin Media O2 footprint and new areas. 

Mike Fries, CEO and vice Chairman at Liberty Global said: ‘This landmark agreement with Liberty Global, Telefonica and InfraVia will expand our FTTH footprint to millions of new UK homes, creating the undisputed second national fibre network in the UK. VMO2 has already committed to upgrading its entire existing 16 million footprint to FTTH. This JV will take our aggregate FTTH footprint to up to 23 million homes, reaching around 80 per cent of the UK.’ 

José María Alvarez-Pallete, chairman and CEO at Telefónica added: ‘Telefónica has a recent track record of successfully developing broadband connectivity in many markets through strategic partnerships. The UK is, indeed, a growth market for us and we are very excited to be partnering with InfraVia to accelerate access to next generation broadband connectivity to a larger number of UK households and adding to Telefónica Infra’s growing portfolio.‘

Vincent Levita, CEO and founder of InfraVia concluded: ‘We are excited to be partnering with VMO2, Liberty Global and Telefónica to build and operate up to 7 million premises FTTH in the UK. 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. We look forward to working with VMO2, Liberty Global and Telefonica in this partnership in the years ahead.’

The transaction is expected to close in the fourth quarter of this year, subject to customary conditions.


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