Virgin Media O2 focuses on the positives after a challenging Q1

Liberty Global and Telefónica joint venture Virgin Media O2 makes some progress with its NetCo plan and sees growing momentum with fiber build progress.

Anne Morris, Contributing Editor, Light Reading

May 2, 2024

4 Min Read
VMO2 logo on a billboard on a building.
(Source: Maureen McLean/Alamy Stock Photo)

Anyone hoping to hear more this week about Virgin Mobile O2's recently announced plan to establish a new fixed-line "NetCo" in the UK will be somewhat disappointed. The project is still under wraps as the Liberty Global and Telefónica joint venture continues to plot its fiber strategy.

Mike Fries, CEO of Liberty Global, was nevertheless able to reveal one or two details during Thursday's earnings call, and confirmed that the plan to create a separate NetCo is at least well underway.

"We've hired Deloitte and [Boston Consulting Group] to help us with the actual planning processes and financials and, without asking, have received significant inbound interest from infrastructure investors. That's not surprising. This will be a substantial asset which, if we were to include our nexfibre JV, will reach 21 million fiber homes across the UK," Fries said.

 Nexfibre, a VMO2 affiliate backed by Liberty Global, Telefónica, and private equity firm Infravia, reached the milestone of one million premises passed in April.

Fries also remarked that the creation of a separate NetCo "allows increased financial flexibility and optionality to accelerate our activities" in the UK market. It aligns with the over-arching Liberty Global strategy to "focus on maximizing the value of our FMC telco operations in every market," he said.

"We think our network … will be the second network in the marketplace, and it will attract wholesale customers over time. But more importantly, give us a competitive advantage to retain and grow our broadband base," Fries added.

Mixed results

Meanwhile, VMO2 has just completed a somewhat challenging first quarter when it saw a slight net reduction in its fixed-line customer base to 5.82 million and a 74,500 drop in the mobile customer base to 16 million, as well as marginal decreases in revenue and core profit. Its footprint increased to over 17.19 million "homes serviceable" in the quarter.

Fries noted that the JV was able to gain 5,300 broadband net adds in the quarter, "despite a soft overall market, with estimated industry sales off 7%," and said VMO2's share of gross adds continue to rise.

The decline in the contract mobile base was primarily blamed on the decommissioning of a legacy billing system and migration to a new system. "Since we formed [VMO2], we've grown the mobile contract base every year and we've had consistent mobile service revenue growth, so I would view this as more of a blip than a long-term trend," Fries said.

Lutz Schüler, CEO of VMO2, conceded that there is much to do in the remainder of the year, although he highlighted the positives: "We're gathering momentum in accelerating fiber build and marketing the nexfibre footprint, launching new services to enhance and improve customer experience, and progressing wider IT efficiency programmes as we continue our digital transformation," he said.

Schüler also noted that O2 is being firmly positioned as the premium mobile brand, while Giffgaff is targeted more at the value end of the market. "And you see that start to pay off in our service revenue growth," he added.

Just five things

In addition to its stake in VMO2, Liberty Global controls 50% of the VodafoneZiggo JV in the Netherlands, as well as Sunrise in Switzerland, Telenet in Belgium and Virgin Media Ireland.

Fries emphasized that the group is "investing for growth" across its FMC telco footprint. "For example, our fiber upgrade and extension plans in the UK and Ireland and Belgium are picking up speed and we're on track to reach roughly 20 million fiber to the home premises by the end of 2026. And that represents just about 50% of an expanded 40 million home footprint."

He added: "5G is the same story, where in addition to consumer and competitive retail benefits, we also are starting to see real B2B opportunities emerge from mobile private networks and network slicing and IoT applications. And then finally, like our peers, we believe the investments we're making in digital and AI will be game changers for us."


Fries particularly highlighted progress that has been made with five key initiatives that Liberty unveiled during its last call in February, including the creation of the UK NetCo.

The other four include the intention to list Sunrise in Switzerland and spin off 100% of the shares to Liberty Global shareholders in the second half of 2024; the creation of Liberty Holding Benelux as a strategic holding company for its interests in Telenet and VodafoneZiggo; the agreement to sell All3Media, its 50/50 joint venture with Warner Bros. Discovery to Redbird IMI for £1.15 billion (US$1.44 billion); and plans to buy back up to 10% of its shares in the 2024 calendar year.

The Sunrise spin-off is now scheduled for the fourth quarter of 2024, for example. The sale of All3 has been approved and has a closing date of May 15, while the proceeds of $400 million are to be invested in Sunrise.

"You should assume we're prioritizing the things that we think will create value for shareholders and we look forward to updating you on the next quarter," Fries concluded.

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About the Author(s)

Anne Morris

Contributing Editor, Light Reading

Anne Morris is a freelance journalist, editor and translator. She has been working in the telecommunications sector since 1996, when she joined the London-based team of Communications Week International as copy editor. Over the years she held the editor position at Total Telecom Online and Total Tele-com Magazine, eventually leaving to go freelance in 2010. Now living in France, she writes for a number of titles and also provides research work for analyst companies.

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