Talks have reportedly begun between Virgin Media O2 and Cityfibre over a possible takeover worth £3 billion
Virgin Media O2 (VMO2) is reportedly exploring a takeover bid for broadband provider Cityfibre that could potentially be worth up to £3bn.
This is according to the Daily Telegraph, which reported it had learned that initial talks have taken place between Mike Fries, chief executive of Liberty Global (the parent of Virgin Media O2), and Cityfibre boss Greg Mesch.
London-based CityFibre is a fibre to the premise broadband provider in at least 60 cities in the UK including London and York, providing services to telecoms providers including Vodafone and TalkTalk.
Last month CityFibre announced plans to cut up to 400 jobs – or a fifth of its workforce – in a bid to cut costs.
It lost almost £50m in 2021.
The CityFibre full fibre network network is said to reach around 2 million homes, but it hopes to reach 8 million properties by 2025.
According to the Daily Telegraph, a takeover of the loss-making business would help Virgin Media O2 expand its network and meet its target of upgrading its entire network to full fibre.
An estimated 50 percent of Cityfibre’s network reportedly overlaps with the network of Virgin Media O2.
According to the Telegraph, VMO2 is understood to be working with bankers at US-based LionTree to explore potential deals for a number of other smaller alt nets.
One source reportedly said Cityfibre could command a price tag of more than £3bn.
VMO2 and Cityfibre declined to comment to the Telegraph.
Virgin Media O2 is jointly owned by Liberty Global and Telefonica, after Virgin Media (owned by Liberty Global) and mobile operator O2 (owned by Telefonica) agreed in 2020 that they would form a 50:50 joint venture.
The joint venture combined Virgin Media’s broadband, TV, mobile and landline services with the mobile operations of O2, which is the UK’s largest mobile platform.
The two firms undertook the merger, so the combined entity could present a more significant challenge to BT (which owns EE) going forward.
It should be noted Virgin Media’s network covers roughly 53 percent of UK homes, as its network reach tends to be more centred around towns and cities, and not in more rural locations or villages.
BT meanwhile is currently spending £15bn to build out a full fibre network to 20 million homes or businesses by the mid- to late-2020s.