The CMA’s surprising counterfactual and narrow competitive assessment present uncertainty for future altnet consolidation
The deal could lead to reduced competition in the supply of wholesale broadband
On 5 October 2026, the Competition and Markets Authority (CMA) published its interim report on its Phase 2 investigation into the proposed nexfibre/Netomnia transaction in the UK. The CMA has provisionally found that the deal may be expected to result in a substantial lessening of competition (SLC) in the wholesale supply of fixed broadband services within the parties’ (i.e. nexfibre, Virgin Media O2 and Netomnia) combined fibre footprint. In reaching this milestone in the process, the CMA has considered a “wide range of evidence”, including inputs from the parties and third parties (e.g. responses to its areas of focus document), as well as data and technical expertise from Ofcom. The interim report does not represent a final decision, with interested stakeholders having until 23 October to provide submissions on the report and further input to the ongoing review.
The parties also had three working days to confirm to the CMA whether they intended to submit a completed remedies form, which would then need to be sent to the authority’s Phase 2 Inquiry Group for consideration by 16 October. Both Sarah Cardell (Chief Executive, CMA) and Doug Gurr (Chair, CMA) have stated publicly that any deal that is capable of being cleared, should be – either unconditionally or with effective remedies. While 29 of the 32 transactions reviewed by the CMA in 2025 were approved in this way, it is currently unclear as to whether the remedies process could lead to an acceptable outcome for the parties to get nexfibre/Netomnia over the line.
The CMA’s choice of counterfactual provides an indication of how it would prefer the market to develop
The CMA’s starting point has been to determine what would likely happen if the transaction did not take place, the potential implications of which it would compare against those that might materialise if nexfibre was to purchase Netomnia. While acknowledging the inherent uncertainty to this exercise, the CMA’s choice of ‘counterfactual’ for both acquirer and acquiree is nonetheless surprising. It has concluded (provisionally) that, absent the deal, CityFibre would have bought Netomnia, seeming to contradict a widespread understanding across the sector that an agreement between the two operators could not be reached (principally because of the ratio of cash to equity within CityFibre’s overall offer). For nexfibre and Virgin Media O2, the CMA has relied on the assumption that the latter would – without providing a precise timeline or extent – upgrade its cable infrastructure to fibre, while the two operators would open up their networks to external ISPs on a wholesale basis. The counterfactual is an analytical tool that underpins the CMA’s competitive assessment of a proposed merger. More so than reaching its alternative reality with such confidence, the authority has all but signalled to the market and its investors how it would prefer future developments to play out, potentially clearing a path for a CityFibre/Netomnia deal should the transaction on the table not come to pass. By highlighting Netomnia’s deteriorating financial outlook, the CMA has also dealt Netomnia a blow by essentially guaranteeing that it should only expect to achieve a markedly lower valuation than the £2bn figure agreed with nexfibre – while buying CityFibre time to shore up additional funding to reapproach its target.
There would be a loss of competition in around 14% of the parties’ combined fibre network footprint
In exploring the potential impacts of the transaction, the CMA has considered the relevant market for its competitive assessment to be the wholesale supply of fixed broadband (including fibre and Openreach legacy technologies) within the parties’ combined fibre network footprint. A silver lining for the parties is that the CMA has not included Virgin Media O2 cable in the relevant market; however, in line with the counterfactual, it has assumed that this would over time be upgraded to fibre. On that basis, the authority has first analysed the extent of overlap between the parties’ networks, considering that this indicates the degree of direct competition between wholesale providers. Finding a ~14% overlap, the CMA has stated that relative to the counterfactual, the deal would reduce the proportion of Virgin Media O2 and nexfibre’s total network in which the parties, CityFibre and Openreach would all be present from ~32% to ~18%. Its provisional view is that this would have a significant impact on wholesale competition within the parties’ network footprint, because CityFibre is a “vigorous wholesale competitor”, which is supplying Tier 1 and 2 ISPs on “highly competitive terms”. Notably, the CMA has recognised Openreach as an important wholesale competitor, but simultaneously considered that it is a regulated entity that cannot freely compete on key metrics such as price and service. For these reasons, the authority’s preliminary position is that the merger would result in an SLC in wholesale broadband.
The CMA is largely unconvinced by the transaction’s efficiency benefits
In terms of countervailing factors, the parties have argued that the transaction would unlock significant new investment and create a more effective and financially sustainable challenger to Openreach, creating wholesale broadband competition for the first time in the UK. The CMA, however, has considered that any increased scale resulting from this “primary efficiency claim” is not merger-specific and would be mostly eroded by Virgin Media O2’s expected network upgrade. It has also stated that the parties have provided limited evidence to support their assertion that the deal would materially increase the likelihood of ISPs agreeing a wholesale deal with nexfibre or Virgin Media O2. In summary, the CMA’s provisional view is that none of the parties’ efficiency claims would be timely, likely and sufficient to prevent an SLC from arising. In practice, mergers are rarely cleared on efficiency arguments alone, although they may be taken into account when the CMA considers options to remedy competition concerns it has identified.
To know how things may end is like playing three-dimensional chess. For CityFibre to return to the negotiating table with a more attractive offer for Netomnia, it would have to first secure the necessary lending. We have said previously that it would be a pro-competitive transaction, involving minimal network overlap. One that with the CMA’s help, may have now been wished into being.
