CMA provisionally finds Nexfibre's £2bn Netomnia deal may lessen broadband competition

Britain's competition regulator has dealt a serious blow to one of the largest consolidation deals in the country's fibre broadband market. On October 2, 2026, the Competition and Markets Authority published its Phase 2 interim findings, provisionally concluding that Nexfibre's £2 billion ($2.7 billion) acquisition of Netomnia's parent company, Substantial Group, may be expected to result in a substantial lessening of competition in the wholesale supply of fixed broadband services.

The deal, agreed in February 2026, would combine Nexfibre, a joint venture backed by Liberty Global, Telefonica and InfraVia Capital Partners, with Substantial Group, which owns the altnet fibre network Netomnia and its retail brand YouFibre. Netomnia is the country's second largest alternative fibre network, and the acquisition was promoted as a way to accelerate full fibre rollout across the UK.

The CMA's interim report goes further than simply identifying competition concerns. The regulator said it would have preferred that CityFibre, a rival wholesale network operator, was buying the fibre broadband operator instead. CityFibre, which reportedly made an offer for Netomnia, urged the CMA to block the deal, describing it as a significant reduction in competition.

Nexfibre immediately pushed back. Its chief executive, Rajiv Datta, told Reuters that the CMA had outlined a "counter-fantasy" to its deal. He argued the regulator had failed to prioritise the fibre investment Britain needed and the creation of a scaled, sustainable challenger to market leader BT's Openreach network.

Key Facts

Reuters reported on October 2, 2026 that the CMA said Nexfibre's proposed acquisition of Netomnia could substantially reduce competition, adding that it would have preferred CityFibre to be the buyer. The deal would add more than 3.4 million premises and over 500,000 customers to Nexfibre's UK footprint, taking its expected total to 8 million premises by the end of 2027. Combined with Virgin Media O2, which is also owned by Liberty Global and Telefonica, the group would have access to 20 million premises over time, compared with 25 million for BT's Openreach network.

ISPreview reported on October 2, 2026 that the CMA's fast-tracked Phase 2 interim findings found the deal may cause a substantial lessening of competition in wholesale fixed broadband, with remedies due by October 16, 2026. The regulator's overlap analysis found that the Virgin Media O2 and Nexfibre network is fully overlapped by Openreach, around 14% overlapped by Substantial and around 18% by CityFibre. In the counterfactual scenario, three wholesale providers (Openreach, Virgin Media O2/Nexfibre and CityFibre) would compete across around 32% of the Virgin Media O2/Nexfibre footprint, falling to around 18% after the deal. On the Netomnia side, around 26% of the Substantial network is overlapped by Virgin Media O2/Nexfibre FTTP today, rising to around 82% if Virgin Media O2 upgraded its whole cable network to fibre.

Capacity reported on October 2, 2026 that the interim report gives Nexfibre and Substantial until 5pm on October 16, 2026 to submit remedy proposals, with a statutory final decision deadline of December 15, 2026. The CMA will then consult publicly on remedies. Interested parties have until 5pm on October 23, 2026 to respond to the interim findings.

The Competition and Markets Authority's official case page, updated on October 2, 2026, states that the Phase 2 inquiry group is chaired by Cyrus Mehta, with panel members Robin Cohen, Ashleye Gunn and Crispin Wright. The case was referred to Phase 2 under the fast-track procedure at the request of the merging parties on July 1, 2026, after the CMA launched its merger inquiry on June 29, 2026 and ran an invitation to comment from April 23 to May 8, 2026. Interim undertakings were accepted from Substantial on July 17, 2026 under section 80 of the Enterprise Act 2002. Responses to the areas-of-focus document were filed by BT Group, CityFibre, Grain Connect, Hyperoptic, Sky and the parties.

The CMA said CityFibre-Netomnia combination would have created a stronger challenger to Openreach and to the enlarged Nexfibre/Virgin Media O2 business, and could wholesale Netomnia's network to existing customers including Sky and VodafoneThree. The regulator described CityFibre as a "vigorous wholesale competitor" and said Openreach, as a regulated business that cannot freely compete on price and service, would not offset the loss of competition. It added that weaker wholesale terms tend to feed through to retail prices, with the impact falling disproportionately on consumers and businesses in the midlands and north of England including Birmingham, Bradford and Manchester.

Analysis

The CMA's provisional findings rest heavily on the counterfactual: what would have happened without the deal. The regulator said that both Nexfibre and CityFibre bid for Substantial in a 2025 sale process. It concluded that Substantial's financial outlook had deteriorated, its shareholders had a strong incentive to sell to CityFibre, and CityFibre would likely have been able to raise funding at a valuation they would accept. Its provisional view is that the most likely alternative is a CityFibre acquisition of Substantial, after which CityFibre would wholesale the Netomnia network to its ISP customers including Sky and VodafoneThree and sell retail brand YouFibre to a third party.

Nexfibre's defence is that the CMA has misunderstood the economics of fibre investment. The company and its shareholders said the interim report "does not reflect the commercial and competitive reality of Britain's fibre market" and criticised it for failing to prioritise fibre investment. Datta told Reuters: "This is a transaction that is fully financed, that is ready to go... It seems that they are considering something that is not real." Nexfibre has also pointed to the £1 billion in new net funding committed by InfraVia, Liberty Global and Telefonica: £850 million from InfraVia and £150 million jointly from Liberty Global and Telefonica. The deal was promoted as unlocking a £3.5 billion investment in the UK market and upgrading 2.1 million Virgin Media premises from coax (HFC) to full fibre.

The CMA rejected the efficiency case, accepting some added scale but saying Virgin Media O2's own cable-to-FTTP upgrade programme would erode most of it. What this really means is that the regulator is not convinced that the merger's claimed benefits are sufficiently merger-specific or verifiable, and it is prioritising the competitive constraint that a standalone CityFibre would provide. The CMA found that VMO2/nexfibre's network is fully overlapped by Openreach, around 14% overlapped by Substantial and around 18% by CityFibre, with minimal overlap between the two altnets. Its concern is that removing CityFibre as a potential buyer of Substantial removes a vigorous wholesale competitor from the market.

Analyst Karen Egan at Enders Analysis said the deal could be called off before the final CMA decision on December 15 "unless Nexfibre/Netomnia still believe there is a sufficient chink of hope". Datta said Nexfibre would consider the report before deciding next steps. CityFibre CEO Simon Holden warned the deal would "significantly reduce competition and the choice available to consumers, as well as force hundreds of thousands of Netomnia customers back to VMO2". CityFibre said: "After recognising that harm, it is vital that the CMA takes the next step and blocks the deal."

Why It Matters

This is a pivotal moment for UK broadband consolidation. The CMA's provisional conclusion that the deal may substantially lessen competition in wholesale fixed broadband services sets a high bar for further altnet consolidation. If the regulator blocks the Nexfibre-Netomnia deal, it will have signalled that it views CityFibre as a necessary counterweight to both Openreach and the combined Virgin Media O2/Nexfibre group. That could reshape investment incentives across the sector, particularly for fibre builders that have struggled to raise capital as the market matures.

The impact could be felt most acutely in the midlands and north of England, including Birmingham, Bradford and Manchester, where the CMA said weaker wholesale terms would feed through to retail prices and fall disproportionately on consumers and businesses. Substantial Group is backed by over £1.6 billion of equity and debt from investors including Advencap, DigitalBridge and Soho Square Capital, and Netomnia sells via retail brand YouFibre. A CityFibre acquisition would involve wholesaling Netomnia's network to ISPs including Sky and VodafoneThree and selling YouFibre to a third party, a very different outcome from folding Netomnia into the Nexfibre/Virgin Media O2 footprint.

The case also tests the CMA's willingness to accept the merging parties' claimed investment benefits. Nexfibre argued the deal would create a scaled, sustainable challenger to Openreach. The CMA instead found that Openreach, as a regulated business, would not offset the loss of competition from CityFibre. With BT's Openreach network reaching 25 million premises compared with the 20 million that the combined Nexfibre and Virgin Media O2 group would reach over time, the regulator appears to have concluded that scale alone does not justify the competitive loss.

Next Up

Nexfibre and Substantial have until 5pm on October 16, 2026 to submit remedy proposals to the CMA. Interested parties then have until 5pm on October 23, 2026 to respond to the interim findings. The CMA will consult publicly on any remedies before issuing its final decision by the statutory deadline of December 15, 2026. Nexfibre's Rajiv Datta said the company would consider the report before deciding next steps, and it can submit remedies by October 16.

CityFibre, meanwhile, has called on the CMA to block the deal outright, while Nexfibre's shareholders maintain the interim report does not reflect commercial reality. The final outcome will depend on whether the CMA accepts remedies that preserve wholesale competition, or whether it concludes that only a prohibition can address its concerns. For now, the deal remains in limbo, with a final decision due before the end of the year.