The UK Competition Authority stops the purchase of Netomnia by Telefónica and its partners

The UK Competition Authority has found competition problems in the purchase of fiber optic operator Netomnia by Telefónica and its partners.

The British regulator is thus inclined to not give the green light to the transaction, although its decision is not final and has given way to a period of allegations that will last until October 23, according to the documents consulted by EL MUNDO.

If the slam of the purchase is confirmed, it would be a blow for Telefónica and its aspirations to update the network of Virgin MediaO2, its operator in the country, to fiber optics, in addition to disrupting the largest purchase operation undertaken by its president, Marc Murtra.

The operation was financially complex and was valued at more than 2,000 million pounds (2,350 million euros at the exchange rate). This was carried through Nexfibre, an operator in which Telefónica, its partner in the United Kingdom, Liberty Global, which controls the other 50% of Virgin Media O2, and the Infravía fund are present.

"The preliminary report does not reflect the commercial and competitive reality of the British fiber market. It fails to prioritize the investment the country needs and create a sustainable competitor to Openrearch," Nexfibre said.

The company that includes Telefónica, Liberty Global and Infravía points out that the operation involves an investment of 3.5 billion pounds in the country and questions the message that the United Kingdom sends to other international investors.

"Getting in the way of this deal would suggest that Britain is closing the door to international investment by reinforcing Openreach's monopoly and leaving consumers to pay the price," the company underlines.

The operation was very relevant for the company for two reasons. Netomnia, which operates under the Substantial brand, provided 400,000 homes with fiber and a plan to deploy 3.4 million more homes. In addition, it overlapped with areas of the Virgin Media O2 cable network whose customers could be migrated with less expense than building a new network.

However, precisely this overlap of networks can bring down the operation, since it is what the British Competition considers dangerous, since the United Kingdom would have only two fiber operators in 82% of the country, while if Netomnia is acquired by an independent operator, such as Cityfibre, the figure drops to 68%.

This leads the British Competition to conclude that the operation would end up raising prices and worsening the quality of service for consumers.

The other big problem that would arise for Telefónica and Liberty Global is that the structure of the agreement involved the transfer of 2.5 million customers from the Virgin Media O2 network to the partnership with the fund, which was going to translate into a payment of 1.1 billion pounds (1.28 billion euros) to the operator to reduce its large debt and reduce its interest bill, something that is now in question.

The United Kingdom is the Telefónica market that worries investors the most, since Virgin MediaO2 is losing share and faces a very high debt, which has significantly reduced the dividends received by its two shareholders and makes a new cut plan hovering over the group to right the situation.