• The CMA is reviewing Nexfibre's proposed £2bn acquisition of Substantial Group, including Netomnia, with a 15 December deadline
  • The deal could take VMO2 and Nexfibre's combined footprint from 7.7 million premises in March to nearly 10 million

The fact

The Competition and Markets Authority is conducting a Phase 2 investigation into the proposed acquisition of Substantial Group by Liberty Global, Telefónica and InfraVia through their Nexfibre joint venture. The parties agreed the £2bn transaction in February, and the CMA referred it for an in-depth review on 1 July under a fast-track procedure requested by the merging companies. Its statutory deadline is 15 December.

Substantial includes the Netomnia fibre network and the YouFibre and Brsk retail businesses. According to figures cited by Light Reading, Virgin Media O2 and Nexfibre had a combined footprint of 7.7 million premises passed in March, which could rise towards 10 million with Netomnia.

CityFibre opposes the transaction and has argued that overlap between the networks would reduce infrastructure competition. Nexfibre says the enlarged platform would create a stronger wholesale challenger to Openreach.

The assessment

The CMA has to consider two different effects of the same transaction. Adding Netomnia would give Nexfibre greater scale, more fibre coverage and a larger base from which to sell wholesale access. At the same time, where the networks already overlap, combining them removes separately controlled infrastructure that could otherwise compete for the same customers.

The number of premises passed does not settle that question. A wholesale network competes when internet providers can buy access on workable terms and place enough customer connections on it. Scale can help that model, but local network overlap can still reduce the number of physical alternatives available in particular areas.

For BTW readers, the important question is what remains independent after the acquisition: how many separate fibre networks serve overlapping areas, and how readily third-party providers can buy capacity from the enlarged Nexfibre platform.

What to watch

Watch the CMA's findings on local network overlap and any remedies proposed before the 15 December deadline. Wholesale-access commitments, network divestments or other conditions would show how the regulator intends to preserve competition if it allows the transaction. Third-party ISP agreements after any approval would then show whether greater network scale produces broader wholesale use.