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Virgin Media O2 chief calls for more incentives to upgrade Britain's 5G

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Virgin Media O2 chief calls for more incentives to upgrade Britain's 5G
Virgin Media O2 chief calls for more incentives to upgrade Britain's 5G

The chief executive of Virgin Media O2 has warned ministers and regulators that "something has got to change" if Britain is to hit its targets for upgrading to faster 5G mobile.

Lutz Schuler said the incentives that have spurred the industry into carpeting the nation in gigabit speed broadband were missing for mobile, despite a pledge by Michael Gove, the Levelling Up Secretary, to bring widespread 5G coverage by 2030.

He echoed concerns from the mobile industry in recent weeks, which has demanded tax breaks, cheaper airwave fees and the ability to carry out industry mergers so they can make the returns needed to increase investment in mobile.

The call came as Virgin Media O2's joint owners revealed that talks were underway with "a number of potential financial partners" about becoming an outside investor in a full-fibre network targeting 7m homes and businesses by the end of 2027.

Liberty Global and Telefonica confirmed that Virgin Media O2 would become the anchor tenant of the new network, which will offer wholesale access to broadband retailers.

The Telegraph reported in October that Sky was in talks to become an investor in the project, while Vodafone and TalkTalk have also had separate discussions about securing a wholesale tie-up that would hand their customers access to the network.

Mr Schuler, who became chief executive last year following Virgin Media's £31bn merger with the mobile operator O2, said the regulator's interventions on broadband have made the market more investment friendly, but the same cannot be said for mobile.

He added: "Look what BT's Openreach has committed to broadband, look at what we are intending to do. I think that has worked.

"But if you compare that with mobile, then something needs to change there. 5G is a massive investment: It costs billions.

"Ofcom has shared that four mobile network operators are sitting on diminishing returns, and if your margin is getting below cost of capital then things have to change. If we don't get it right then investment in 5G won't happen on time. It is as simple as that."

He made the comments as the company gave an update on its full-year results. Revenues fell 1pc to £10.4bn for the year to December, despite securing new mobile contracts hitting a six-year high in the final three months of 2021.

However, profits rose by 2pc to £3.7bn over the period after securing 177,000 broadband customers over the year and completing its gigabit rollout.

Telecoms bosses have long complained that years of tight regulation and strong competition have been keeping customers’ bills cheap at the expense of their profits.

Nick Read, chief executive of Vodafone, recently branded the UK a "crowded marketplace" that needs consolidation to help spur industry investment in next generation 5G connectivity.

Vodafone has been strongly linked to a merger with Three UK.

Ofcom has offered some hope to the industry by saying it will review takeovers on their benefits and pitfalls, as opposed to throwing out a deal because it would reduce the number of competitors. However, it has also claimed that there is no evidence to suggest consolidation improves service quality or investment.

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