The UK's Competition and Markets Authority has issued an interim report opposing Nexfibre's proposed £2 billion (US$2.6 billion) takeover of Netomnia, a deal that would create a full-fiber network spanning 5.8 million UK premises and growing to roughly 8 million by end-2027.

The regulator's provisional view treats CityFibre as the most likely counterfactual buyer of Substantial — Netomnia's parent — if the current transaction collapses. Nexfibre CEO Rajiv Datta called the reasoning a "counter fantasy."

What does the CMA actually object to?

Nexfibre is half-owned by Liberty Global and Telefónica, the parents of Virgin Media O2 (VMO2). The CMA calculates that 14% of the combined VMO2/Nexfibre full-fiber footprint overlaps with Netomnia's network. Customers in those areas would face a wholesale choice of only Openreach — BT's access arm — and a VMO2/Nexfibre strengthened by the deal.

Assembly Research, tracking XGS-PON overlap more narrowly, counts about 540,000 homes where VMO2/Nexfibre and Netomnia compete head-to-head. Datta told Light Reading in March that the figure was closer to 200,000.

Why does the regulator prefer CityFibre?

CityFibre already weighed bidding for Netomnia, sources confirmed, but CEO Simon Holden failed to win investor backing for a higher offer. CMA reviewers nonetheless concluded CityFibre would acquire Substantial if blocked from merging with Nexfibre, citing "minimal" overlap with Netomnia's footprint.

James Robinson, senior analyst at Assembly Research, posted on LinkedIn: "In doing so, the Competition and Markets Authority may have signaled (if not in words, but at least in effect) how it wants the fiber market to develop, which doesn't feel like what its review should do."

Datta was blunter. "They're supposed to consider a counterfactual. It feels like they've considered a counter fantasy, and that counter fantasy they have includes this view that CityFibre would do a series of things," he told Light Reading.

How serious is the wholesale competition problem?

Openreach still dominates UK access infrastructure. The BT-owned wholesaler passed almost 23 million premises by end-March and serves 19.3 million broadband retail customers, having shed roughly 1.9 million over the previous two years. Nexfibre, even after acquiring Netomnia, would top out below 6 million premises; CityFibre sits below 5 million.

Datta argued at a June breakfast briefing that competition policy has not delivered the altnet shakeout it once promised. "Logically, with this position by the regulator, their share should go down from x to y, and I would argue that they're nowhere near where y should be," he said.

The CMA's interim report adds another warning. It notes that "Substantial's financial outlook has deteriorated in recent years, and whilst it was a viable option to continue as a standalone entity, this was not attractive compared to a sale at an acceptable valuation." That language is likely to weigh on Substantial's future valuation and chill investment in UK fiber.

What about the BT-TalkTalk deal?

Announced the same day, BT's takeover plan for the struggling TalkTalk retailer would hand the incumbent another 2.5 million customers and remove the UK's fourth-largest broadband retailer from the field.

How shaky is the assumption that CityFibre would build?

CityFibre added 800,000 premises in 2024, lifting its footprint to 4.4 million. It expanded by fewer than 600,000 over the subsequent 18 months. VMO2, meanwhile, is chasing about £600 million ($793 million) in cost savings, raising doubts about its capacity to upgrade cable plant to FTTP.

Karen Egan, managing director of telecoms at Enders Analysis, posted on LinkedIn: "One point that may still be debatable is whether VMO2 will upgrade its network from cable to fiber... The CMA seems to believe that it will whether this deal happens or not, which may not be right."

A final CMA decision is expected in the months ahead, with Nexfibre and Substantial entitled to respond to the provisional findings before the regulator rules on whether the £2 billion takeover can proceed.