VMO2 invests £2bn in network, plans new wholesale venture

VMO2 invests £2bn in network, plans new wholesale venture

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The first - not quite - full year financial results from the merged Virgin Media O2 have been published, confirming network capex investments of £2 billion and a new fibre venture.

The results, published Friday, confirmed revenues of £10.4 billion adjustments for transactions and a 2% growth in transaction adjusted EBITDA to £3.7 billion. The firm made capital investments of £2 billion in network infrastructure and customer experience over the full 12 months.

CEO Lutz Schüler, said: “In a historic year for our business, which saw the completion of the UK’s largest ever telecoms merger, we stayed focused and finished 2021 on a high.

“We saw sustained subscriber growth across fixed and mobile as the demand for fast, reliable connectivity remains, and delivered an increase in profitability while investing more than £2bn in our network, services and future growth drivers."

The merger between Liberty Global and Telefónica's UK businesses dates back to 2020 and completed in June. At the time it marked the UK's largest ever telecoms merger and their first joint product, Volt, followed in October.

Now, seven months later, the merged company is launching its first network project.

Liberty Global and Telefónica have initiated discussions with "a number of potential financial partners" to gauge their interest in participating in a network build JV.

Virgin Media O2 will be the anchor tenant with wholesale access sold to ISPs as it connects up to seven million premises in new greenfield areas by the end of 2027. Once complete it will extend total gigabit reach to around 23 million premises.

On the USP Virgin Media O2 said it will provide "a clear incremental growth opportunity by offering services to a wider pool of customers and higher cross and upsell due to the increased overlap of fixed and mobile services".

Further details were thin on the ground, but the investment theme continued elsewhere in the results as Virgin Media O2 said that opex and capex cost to capture is on track to reach more than £300 million with property and equipment additions of around £2.1 billion as network investments increase.

Achievements and outlook

In Q4, network expansion Project Lightning saw new builds ramp up to 93,000 in Q4, resulting in 328,000 additional premises passed over the full year and a cumulative build of 2.7 million on this project alone. The gigabit rollout completed on schedule in Q4 making Virgin Media O2 the biggest contributor to the UK Government’s broadband target. Gigabit speeds are now available to more than half of all UK premises. Thirdly, FTTP upgrade pilots are reported to be progressing well, with the deployment of full fibre across the entire fixed network scheduled to commence later this year and complete in 2028.

On mobile, 5G now covers more than 300 towns and cities after 2,000 site additions over the year, meaning the 50% coverage by 2023 target remains on track. Leveraging its low-band spectrum holdings, there are plans to deploy on the700MHz band. On 4G capacity was upgraded in more than 241,000 postcodes through 2021.

Round off the financial updates, adjusted free cash flow was £338.4 million for the seven-month period since the company was formed with an inflow of £111.3 million in the last quarter. A cash distribution of £322 million was made to shareholders during Q4.

Next year the cash distribution to shareholders is anticipated to be £1.6 billion including cash from recapitalisations. Full year guidance confirms mid-single-digit growth is expected in transaction adjusted EBITDA on a pro forma basis.

The next issue of Capacity magazine features Virgin Media O2's director of wholesale and fixed, Diego Tedesco.

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