Cable Tech

VMO2 fiber JV in 'concrete discussions' with financial partners, says Liberty Global CEO

Declaring that Virgin Media O2's general fiber rebuild project is "on track," Liberty Global CEO Mike Fries stressed that the UK operator is making progress in locking in additional financial backing for its fiber-focused joint venture.

"We've received strong interest from the financial community on our plans to build an additional 5 to 7 million greenfield fiber homes with concrete discussions underway as we speak," Fries said Wednesday on Liberty Global's Q1 2022 earnings call.

Liberty Global CEO Mike Fries, shown here at the 2017 Mobile World Congress in Spain, isn't convinced that a lobbying effort from several major European operators to recoup some costs from streaming services will succeed. 
  (Source: Reuters/Alamy Stock Photo)
Liberty Global CEO Mike Fries, shown here at the 2017 Mobile World Congress in Spain, isn't convinced that a lobbying effort from several major European operators to recoup some costs from streaming services will succeed.
(Source: Reuters/Alamy Stock Photo)

Those plans refer to a joint venture with Telefónica and Liberty Global that's building out fiber-to-the-premises (FTTP) connections to up to 7 million new greenfield homes beyond VMO2's current footprint by the end of 2027. If all comes to pass, that footprint will cover about 23 million homes, giving the company a fiber foundation upon which to compete with rivals such as BT.

Fries has previously acknowledged that VMO2's existing DOCSIS 3.1-based hybrid fiber/coax (HFC) network will stick around, but the fiber upgrade/overlay means DOCSIS 4.0 will be skipped in favor of the leap to FTTP, at least in the UK.

The FTTP overlay approach by VMO2 will also be carried out similarly by Virgin Media Ireland. However, the gameplan will vary across other Liberty Global operations in Europe. Sunrise UPC is going with a hybrid approach in Switzerland with DOCSIS 4.0 and select fiber builds, and Telenet will also go with selected fiber investments in Belgium. In the Netherlands, VodafoneZiggo is pushing ahead with a hybrid model that emphasizes DOCSIS upgrades.

Staying on the streaming sidelines

For now, Liberty Global will keep at arm's length a lobbying effort led by a group of major European operators to recoup some of the rising network and capacity costs associated with the growing popularity of streaming services. Deutsche Telekom, Orange, Telefónica and Vodafone have urged the European Union to put forth legislation that forces Big Tech companies, such as Netflix, to pay part of the freight for their network investments.

"This is a long-standing debate in European telco sector among operators, regulators and the Big Tech companies," Fries said when asked to weigh in on the issue. "I'm not convinced that it will be successful. If it were to be successful, we would gladly benefit and participate in a regulatory initiative that supported it."

Fries called it a "difficult issue," as all parties benefit from the current ecosystem. While operators are delivering high-capacity, high-quality networks for connectivity, Big Tech companies and streamers are providing services that drive consumers to those networks, he pointed out.

Fries acknowledged that the pandemic drove consumers to streaming services, causing data usage and capacity utilization to rise 30% to 40%.

"We will bear the burden of increasing investments in our networks, and it [the rise in data utilization] certainly has had some impact on our decisions in certain markets to invest in fiber," Fries said. He added that Liberty Global will watch the issue "closely," but stressed that Liberty Global has yet to put forth a formal position on the matter.

Sales softness, but 2022 guidance maintained

On the financial front, Liberty Global lamented general softness in sales and inflationary pressures, but reiterated full-year 2022 guidance.

VMO2 lost 1,000 net broadband subs in the quarter and added just 11,000 mobile postpaid subs. That compared to 39,000 broadband adds and 42,000 mobile postpaid adds in the year-ago quarter.

Fries blamed the softness in broadband sales to a discretionary price increase of 6.5%, the company's largest increase since 2014. He said customer reactions were as expected, but noted that the lack of sales were compounded by reduced marketing and promotional activity in January and February as the price increases took effect.

But VMO2 has yet to see "any noticeable impact from fiber overbuilds," he said, pointing to the fact that the company already markets 1-Gig service across its footprint. Average speeds among VMO2 customer now exceed 230 Mbit/s, up 24% year-over-year, he added.

Among other Liberty Global operations, Sunrise UPC added 11,000 broadband subs and 45,000 postpaid customers. VodafoneZiggo shed 17,000 broadband subs and 37,000 postpaid mobile subs. Telenet added 3,000 broadband customers and 9,000 postpaid mobile subs.

"Although our markets as a whole experienced a slowdown in sales in Q1, which is not atypical for the first few months of the year, our disconnect or churn rates remain very low," Fries said.

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— Jeff Baumgartner, Senior Editor, Light Reading

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