Identification of the appropriate counterfactual is an intriguing question that leaves the parties with some immediate work to do
The CMA outlines the issues it is currently minded to investigate in detail
On 7 July 2026, the Competition and Markets Authority (CMA) published an areas of focus document related to the proposed nexfibre/Netomnia transaction. The document sets out the scope of the CMA’s Phase 2 merger inquiry, as well as initial theories on how the deal might adversely affect competition, but not any findings or conclusions. Typically, the starting point of an in-depth review would be the theories of harm (ToH) that the CMA identified during Phase 1; however, as the acquisition was fast tracked to Phase 2, the document covers the main issues the authority will explore in determining whether it would result in a substantial lessening of competition (SLC) in any telecoms market in the UK. The CMA adds that the considerations presented at this time do not preclude it from assessing further issues should they arise during the course of its investigation.
The choice of counterfactual could be thorny issue to resolve
A notable aspect of the review is set to be the CMA’s comparison of the prospects for competition with the transaction against the competitive situation without it – the latter being known as the counterfactual. It is not a statutory test but an analytical tool used in answering the question of whether a merger gives rise to an SLC. nexfibre and Netomnia (i.e. the parties) have stated to the CMA that the prevailing conditions of competition should not represent the appropriate counterfactual, arguing that they alongside Virgin Media O2 would, absent the transaction, experience “reduced network investment, slower FTTP deployment and higher retail pricing than current conditions suggest”. The CMA’s counterfactual assessment will include consideration of the following issues:
The financial and operational positions of the parties absent the transaction, and the implications of this for their competitive position, including in terms of future network build;
Whether nexfibre/Virgin Media O2 and/or Netomnia (including other entities within the Substantial Group) would likely have competed in the supply of wholesale fixed broadband to retail ISPs absent the transaction; and
Whether, absent the transaction, Netomnia would have consolidated with another altnet.
The second and third issues potentially present the most work for the parties to do in order to secure a favourable counterfactual decision. For example, one that reflects their position that the transaction is needed to create a scaled wholesale challenger to Openreach – and perhaps plays down the chance of Netomnia’s future market entry. The parties and other stakeholders will likely be eager to share their views on the scope for consolidation absent the transaction, particularly given CityFibre’s widely reported interest in acquiring Netomnia.
The competitive assessment will focus on the implications for broadband at the wholesale and retail level
To make an SLC finding, the CMA is required to identify the market(s) in which such a situation might arise. The parties are “currently or potentially” active in the supply of fixed broadband services at both the retail and wholesale level. The CMA will consider whether it is appropriate to define a single product market covering all fixed broadband services, or whether there should be segmentation based on factors such as speed, underlying technology or propositions. In terms of geographic scope, the authority will consider whether the relevant wholesale and retail markets are national or sub-national, taking into account (among other things) network footprints and how prices and other terms are set in practice – including the extent to which they adjust depending on local competitive conditions.
In assessing the competitive effects of the transaction, the CMA states that it will take a forward-looking approach to analysing ToH, considering factors such as operators’ market shares, the degree of rivalry between the parties and Virgin Media and other operators, and wider structural trends facing the industry. At Phase 2, the CMA is minded to anchor its competitive assessment around the impact of the deal on competition between the parties in the supply of wholesale and retail fixed broadband services, but not leased line access, where Netomnia’s presence is minimal. This part of the review will focus primarily on the prospect of horizontal unilateral effects (i.e. individual ability of the merged entity to harm competition by raising prices or reducing quality etc), while also considering vertical links in the supply chain, including whether a new competitive wholesale offer from Netomnia would materially increase competitive pressure on Virgin Media O2 downstream.
Any remedies discussion is unlikely until at least October
Should the CMA conclude that the transaction may be expected to result in an SLC, it would consider whether any remedies might be appropriate to offset the impact, having regard to their effect on relevant customer benefits (RCBs) that the deal might bring about. For instance, the parties have submitted that the acquisition would increase infrastructure competition between nexfibre and Openreach, accelerate fibre take-up and create strong financial incentives to migrate customers from Virgin Media O2’s cable network to fibre technology, thereby generating clear consumer benefit. With the CMA’s updated administrative timeline indicating that a potential discussion of remedies would be unlikely to occur before October, its priority for the next three months will be information gathering and engagement with the parties. In the more immediate term, stakeholders have until 20 July to respond to the CMA’s planned areas of focus.
