The owners of Virgin Media O2 have launched talks to raise hundreds of millions of pounds from investors to fund the rollout of fast fiber optic broadband to millions more UK homes.
Sky News revealed on Sunday that initial talks with infrastructure funds had begun in recent weeks, with the aim of selling a large stake in a new entity that would seek to compete with BT Group’s Openreach arm.
People familiar with the process said it was being led by Liberty Global and Telefonica, which created Virgin Media O2 in a £31billion merger that was completed last year.
The new company is seeking a substantial sum from third-party investors, with one source suggesting the external capital injection could eventually total up to £1bn, they added.
Its aim will be to build up to seven million fiber-to-the-premises homes in parts of the country where Virgin Media O2 does not have a significant presence.
Virgin Media merger O2 is one of Britain’s largest communications companies, with a major presence in mobile and fixed telecommunications, broadband services and pay-TV, where it competes with Sky, the immediate owner of Sky News.
An insider said the new network that Liberty Global and Telefonica were looking to create would be on an open-access basis, with Virgin Mobile O2 as the anchor tenant, but with the ability for others to use it for a fee.
It will be separately owned by Virgin Media O2’s existing fiber network, which aims to upgrade the 15.5 million premises it serves.
VMO2 and its shareholders declined to comment on Sunday.
Mike Fries, vice president, president and chief executive of Liberty Global, said last year that he and Telefonica “wouldn’t be happy to finance a 7 million home expansion ‘by ourselves’, which means setting up all the social capital with no line of sight to third-party financing and/or wholesale.
“On the other hand, I would add that there is quite a lot of money for infrastructure looking for deals like this.
“There are industry partners in the country who might be interested in something like this.”