Virgin Media O2 nears deal to use BT’s broadband network
Heavily indebted UK telecoms group scraps plans to upgrade its own infrastructure as it races to cut costs
Virgin Media O2 is closing in on a deal to use rival BT’s fibre broadband network, as the struggling UK telecoms group halts planned upgrades and expansion of its own infrastructure to ease concerns over its £22bn debt pile.
Under the terms of the deal being discussed, VMO2 would rely on BT’s Openreach network to host new customers in areas that are not covered by its existing network, according to people familiar with the matter.
The UK’s second-largest broadband provider was also pausing efforts to upgrade its cable network to fibre as part of a wider cost-cutting programme, the people said.
VMO2, jointly owned by Liberty Global and Telefónica, has become one of the most closely tracked companies in the credit markets this year.
It was rocked by a sell-off in its bonds over the summer as investors grew concerned that fierce price competition from small fibre network operators, known as “altnets”, is hampering the company’s ability to service its £22bn debt pile.
The price of VMO2’s safest debt has tumbled to below 70 pence on the pound in recent weeks, down from around par at the beginning of the year. Some of the group’s riskier debt — about £1.7bn of complex credit instruments called vendor financing notes — is now trading at the equivalent of 41 pence.
VMO2 was poised to receive a cash injection of £1.1bn in return for transferring 4.6mn homes on to a network owned by Nexfibre, another UK broadband provider part owned by VMO2’s shareholders. However, the UK’s antitrust watchdog signalled this month it planned to block the £2bn deal, which would involve VMO2 taking a 15 per cent equity stake in Nexfibre.
The company currently serves customers through Nexfibre’s network as well as its own. Only about 9mn of the 19mn homes it covers in total have access to a fibre connection.
Plans to upgrade the remainder have now been shelved, one of the people said, adding the economics of the UK broadband market made the investment “unviable”.
The FT reported in September that VMO2’s owners were targeting up to £600mn in cost cuts. The company’s capital expenditure totalled £2.1bn in 2025 across its mobile and broadband operations, according to company filings.
Liberty Global and Telefónica were also considering reducing their £200mn dividend, the FT previously reported.
Deutsche Bank analyst Robert Grindle said that “as a well-known national retail brand but with a fixed [broadband] network which covers just over half the UK, it has always been very logical for VMO2 to consider wholesaling . . . either via altnets or Openreach”.
Virgin Media O2 and BT declined to comment.