Virgin Media O2 owners to challenge UK regulator over Netomnia deal

Virgin Media O2 Owners to Contest UK Regulator’s Ruling on Netomnia Acquisition

Overview of the Netomnia Acquisition Dispute

Background of the Acquisition

LONDON, Oct 20 (Reuters) - Virgin Media O2's owners will challenge Britain's competition regulator's opposition to their £2 billion ($2.7 billion) acquisition of fibre network Netomnia rather than offer remedies to address its concerns, they said on Tuesday.

Competition and Markets Authority’s Concerns

• The Competition and Markets Authority said earlier this month that Nexfibre's acquisition of Netomnia could substantially reduce competition, and it would have preferred rival CityFibre to buy the network.

Details of the Nexfibre Joint Venture

• Nexfibre, a joint venture between Virgin Media O2's co-owners Liberty Global and Telefonica and infrastructure investor InfraVia, agreed in February to buy Netomnia, Britain's second-largest alternative fibre network operator.

Nexfibre’s Response to the CMA

• Nexfibre said it had decided not to submit any possible remedies to address the CMA's concerns and would instead challenge the regulator's reasoning.

•  "The CMA's Interim Report is fundamentally flawed. Its conclusions rely on counterfactuals that do not reflect the commercial and financial reality of the UK fibre market," Nexfibre said.

• "In particular, the assumption that CityFibre will acquire Netomnia is not a credible basis on which to judge this transaction. Nor is the assumption that the billions of pounds of investment enabled by this deal would simply happen anyway."

Potential Market Impact

• The CMA said a combination of CityFibre and Netomnia would have created a stronger challenger to market leader BT's Openreach network and the enlarged Nexfibre/Virgin Media O2 business.

CityFibre’s Position

• CityFibre said it was credible. A spokesperson said: "The CMA has already examined CityFibre in detail and is well aware of our financial position, intentions to recapitalise and of the new £900m contribution from our shareholders."

Additional Information

($1 = 0.7489 pounds)

(Reporting by Paul Sandle; editing by William James)