Virgin Media O2: Tough start to a tough year

G.Network and Gigaclear have emerged from debt distress to (seemingly) carry on as before, with sales processes having failed, and a reset that may end with a not-dissimilar outcome.

The altnet consolidation game appears to be in stalemate as VMO2/nexfibre seeks approval for its Netomnia acquisition, but this will result in continued cash burn, with which investors may lose patience.

Altnet pricing is broadly staying low, as they balance the need to maintain subscriber momentum and conserve cash, resulting in continuing pricing pressure on the ISP incumbents.

VMO2 ended 2025 on a slowing note, with broadband still being hit by altnets and mobile impacted by negative publicity surrounding an October pricing change.

Guidance for 2026 at 3-5% declines for proforma service revenue and EBITDA looks bleak, driven by current momentum and various built-in technical factors, including wholesale payments to nexfibre.

We are not convinced that the agreed nexfibre /Netomnia deal is in any sense a panacea for VMO2’s issues, but there are other green shoots that could help the company back to growth beyond 2026.

VMO2/nexfibre has agreed to buy Netomnia, in a complex multi-party deal involving additional wholesale deal components between VMO2 and nexfibre which will leave nexfibre wholesaling 8 million premises to VMO2, or c.40% of VMO2’s overall footprint.

The purchasers are hopeful of an easy regulatory clearance, but we fear the process may be more protracted given the high overlap and removal of a major competitor.

The impact on VMO2 and other incumbent players is prima facie positive, given that it takes out a major subscriber gainer, but we fear that it will be structurally unhelpful, with the high price encouraging other altnets to continue to disrupt in the hope of a similar take-out.