Liberty Global plc and Telefónica Infra, S.L.U, a wholly owned subsidiary of Telefónica, S.A. , together with InfraVia Capital Partners, a leading independent financial investment firm specialising in infrastructure and technology investments, have reached an agreement to set up a new Joint Venture (JV) that will roll out fibre-to-the-home (FTTH) to greenfield premises across the country. The partnership will initially roll out fibre to 5 million homes not currently served by Virgin Media O2’s network by 2026, with the opportunity to expand to an additional c.2 million homes. This investment of approximately £4.5 billion will provide a major boost to the nation’s digital economy and make a significant contribution to the Government’s gigabit broadband ambitions.
Liberty Global and Telefónica will jointly hold a 50% stake in the JV through a holding company, with InfraVia owning the remaining 50%. Telefónica Group’s participation will be held through Telefónica Infra.
The fibre network will be offering FTTH wholesale access to telecommunications service providers, with Virgin Media O2 (“VMO2”) acting as the anchor client, entering into an agreement with the JV upon closing of the transaction. Coupled with its own fibre investments to upgrade its existing 16 million premises network, this will expand Virgin Media O2’s gigabit footprint to around 80% of the UK upon completion. In addition, the JV will seek to attract additional third-party wholesale clients. The company will target homes across the UK, both adjacent to the existing Virgin Media O2 footprint and new areas.
The business plan for the initial rollout of 5 million homes envisages an investment of approximately £4.5 billion, which includes investments related to the roll-out, envisaged connection capex and other related set-up costs. The three partners will fund their pro rata share of equity funding for the build, up to £1.4 billion in aggregate, phased over 4-5 years. In addition, the JV has obtained £3.3billion of fully underwritten debt financing from a consortium of financing banks, including a £3.1bn capex facility. As part of the transaction, InfraVia will make certain payments to Liberty Global and Telefónica, a portion of which will be linked to the progression of the network build-out.
The transaction is subject to customary closing conditions, including regulatory approval and is expected to close in Q4 2022. Liberty Global and Telefónica were advised by Barclays and LionTree, as well as Allen & Overy. InfraVia Capital Partners was advised by Lazard as well as Linklaters and De Pardieu Brocas Maffei.