A series of moves in recent days and weeks is increasing pressure on rivals, especially BT
Virgin Mobile O2’s CEO, Lutz Schüler, said BT had “better watch out” as the company outlined plans to become the UK’s dominant broadband – and mobile – provider and its Q4 2021 results.
It was formed by a £31 billion merger between Telefonica’s O2 UK business and Virgin Media whose parent company is Liberty Global.
Wholesale ambitions
BT is spending £15 billion to pass 25 million homes with FTTH/FTTP fibre by 2027 while VMO2 is upgrading its networks to reach 15.5 million homes with fibre by the close of 2028.
As the Financial Times [subscription needed] reported at the end of January, it is also engaged in separate negotiations with its parent companies Telefonica and Liberty Global to attract other investors into a joint venture (JV) to pass an additional 7 million homes by the end of 2027 at greenfield locations.
With its parents, VMO2 is hoping to raise “hundreds of millions of pounds”
If the JV goes ahead, the infrastructure it funds will be made available to other service providers on a wholesale basis, such as Sky, Vodafone and TalkTalk which lack their own broadband networks and may also buy wholesale capacity from BT’s Openreach.
VMO2 itself would be the anchor tenant, but Schüler pointed out that Sky is in a strong position, with 22% of the UK’s consumer broadband market.
More gloom for Vodafone?
Earlier this month, This is Money (part of The Mail on Sunday) first reported that VMO2 plans to terminate the five-year agreement it signed with Vodafone UK in January 2021 to launch services for Virgin Mobile’s 3 million mobile customers.
Before the merger with O2, Virgin Media served its mobile customers by acting as mobile virtual network operator – that is, relying on mobile infrastructure owned by others.
The contract with Vodafone ended a 20-year contract with BT’s mobile arm, EE. The new arrangement looked like it might be short-lived after the merger between Virgin Media and O2 was completed.
Some think it could end this year – a considerable blow to Vodafone UK and the wider Vodafone Group which is under pressure from investors to improve its performance.
Vodafone is looking to acquire Three UK, but the process had stalled due to competition authorities’ unease about Three UK selling its tower estate to Cellnex as part of a wider European deal. However, according to This Is Money, that situation appears to be improving.
Eating BT’s lunch?
Two weeks ago, VMO2 announced its Q4 earnings for 2021 which showed it had added 60,000 new broadband customers in that quarter, more than half of the total added by itself and BT.
At the end of Q4 2021, it had 5.8 million broadband, TV and landline customers. During 2021, it added a total of 142,000 fixed customers and 334,000 new contracted mobile subscribers. It now has 42.2 million mobile customers.
The operator reeled in £10.4 billion of ‘transaction adjusted’ revenue, invested £2 billion in network infrastructure and ‘customer experience’ – Virgin Media has been lambasted for poor customer service for a very long time.
It seems that overdue investment might have paid off: in its earnings report VMO2 says, “These factors [such as more, better skilled agents and higher use of web and mobile channels] have led to a 93 per cent reduction in Virgin Media complaints and lower call waiting times, with fixed customer relationship NPS (Net Promoter Score) increasing 9 points and transactional NPS improving 16 points for service interactions in the digital care channel from Q1 2021 to the end of Q4 2021.”
Last week, VMO2 finally dropped its policy of charging customers early exit fees if they moved house during their contract to an area not covered by its infrastructure.
The race is on
VMO2 and a collection of smaller alternative network providers are in a race to build out fibre infrastructure as quickly as possible, backed by private funding.
Equity research house Jefferies was unmoved by Schüler’s rhetoric regarding VMO2’s proposed move into wholesale, pointing no investors have yet been announced and perceives no increased risk to BT from having its fibre infrastructure overbuilt.
Flash sale
Today – Monday 21 February – VMO2 announced further discounts on its ‘ultrafast’ (that is its slower) broadband and phone line bundles.
The new bundles start at £25 per month for a speed of 108Mbps download and 10Mbps upload, with free setup – which usually costs £35 – and inclusive weekend calls.
Customers who sign up also get a wireless router, access to Virgin’s UK network of Wi-Fi hotspots, internet security, parental controls and email.
The minimum contract term is 18 months. However, the new deals appear to be available for a very limited time only and don’t offer protection against hefty price hikes during the contracted period, as just about every UK customer is finding to their cost already.
In some areas, VMO2’s top broadband speeds are up to 1.1Gbps – 22 times the UK national average. It average speed is 214 Mbps