UK regulator flags harm in Nexfibre’s $2.7B Netomnia deal

Netomnia builds and operates a full-fiber network that internet providers can use to reach homes, while sibling YouFibre sells broadband directly to households over that infrastructure. Britain’s Competition and Markets Authority said on October 2 that it had provisionally found competition concerns in Nexfibre’s proposed $2.7 billion acquisition of their parent, Substantial.

The division of labor is straightforward: the network operator constructs and maintains the physical connection, and the retail provider sells subscriptions and serves customers. When the agreement was announced in February, the buyers said Netomnia’s network covered roughly 3 million premises and Substantial had about 450,000 customers. They projected more than 3.4 million premises and 500,000 customers by closing.

Nexfibre is also a wholesale-only network operator, with Virgin Media O2 as its anchor customer. Under the proposed structure, Nexfibre would acquire Substantial and sell the YouFibre and Brsk retail brands to Virgin Media O2. Virgin Media O2 would pay wholesale access fees for customers in homes overlapping or adjacent to the Netomnia footprint.

The CMA’s issue is which rival controls the underlying network. It said CityFibre most likely would have bought Netomnia without the Nexfibre agreement and could have opened the network to existing wholesale customers including Sky and Vodafone. That could have created a larger infrastructure challenger while Nexfibre and Virgin Media O2 continued upgrading the latter’s cable network to fiber.

Nexfibre rejected that scenario. Chief Executive Rajiv Datta described it to Reuters as a “counter-fantasy,” argued that the findings did not reflect Britain’s fiber market and emphasized that the transaction was fully financed. CityFibre took the opposite position and called for the CMA to block the deal.

Nexfibre can propose remedies by October 16, while interested parties have until October 23 to comment on the interim findings. The CMA’s statutory deadline for its final decision is December 15. Until then, its competition conclusion remains provisional and the acquisition remains under review.