BT’s dominance of Britain’s broadband network is being challenged by a new £4.5bn project backed by America’s billionaire “cable cowboy”.
John Malone, a telecoms tycoon dubbed the “cable cowboy” by his biographer, has forged a new joint venture through his investment business, Liberty Global, to bring full-fibre connectivity to 7m homes.
Liberty and Spain’s Telefonica, the co-owners of Virgin Media O2, have joined forces with the infrastructure fund Infravia to build what they claim will be the “undisputed second full-fibre network in the UK”.
Shares in BT dropped more than 4pc after the joint venture was announced.
Virgin Media O2 has been lined up as the anchor tenant of the new network, which will extend its gigabit coverage to 80pc of the nation. Virgin Media O2 had set a target to reach 16m homes with its full-fibre cabling but the additional capacity from the new venture should help it reach 23m homes.
The investment poses a two-pronged challenge to BT's infrastructure arm, Openreach, because the new venture will also offer wholesale deals with internet service providers.
Openreach already has deals in place with Sky and TalkTalk to lease access to its full fibre network. Virgin Media O2 is understood to have already held talks with the likes of Sky, TalkTalk and Vodafone about them becoming wholesale customers of its full-fibre network.
Mike Fries, the chief executive of Liberty Global, said: “This landmark agreement with Liberty Global, Telefonica and InfraVia will expand our full fibre to the home (FFTH) footprint to millions of new UK homes, creating the undisputed second national fibre network in the UK."
The joint venture will roll out full-fibre broadband to 5m homes that do not fall under Virgin Media O2's network by 2026, before potentially expanding to a further 2m homes.
Boris Johnson had vowed to upgrade 85pc of the nation to gigabit speeds by 2025, triggering a flood of private investment backing fledgling broadband companies attempting to capitalise on the expansion.
Virgin Media O2's growing ambitions in full fibre pose a threat to UK's new breed of broadband minnows as they will struggle to compete, making consolidation likely.
Lutz Schuler, the chief executive of Virgin Media O2, said the joint venture would boost Virgin Media O2's position as the biggest challenger in the market.
"Virgin Media O2 will play a crucial role by providing extensive build talent and expertise to the new venture, as well as being a major wholesale customer which fuels fantastic expansion economics from the get-go,” he said.
"Alongside our existing gigabit network, other operators will be presented with a sizeable and attractive wholesale opportunity that will enhance competition and choice like never before.”
The announcement comes as Virgin Media O2 discusses a takeover of its budget rival TalkTalk, in a deal that could bring together Britain's third and fourth biggest broadband operators.
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