London, 29 July 2021: Virgin Media O2 has today announced its intention to upgrade its fixed network to full fibre to the premises (FTTP) with completion in 2028, building on its leadership position as the UK’s largest gigabit broadband provider.
The investment will bolster the operator’s long-term network strategy, fuel future connectivity innovation for consumers and businesses and create options to potentially pursue the broadband wholesale market in the UK.
With the fastest speeds at scale in the country today, Virgin Media O2 will upgrade the cable element of its fibre-rich network and make use of cutting-edge full-fibre technology.
This technology is capable of delivering symmetrical 10Gbps download and upload speeds and beyond, with the upgrade plan covering 14.3 million cable premises, after taking into account the operator’s existing 1.2 million FTTP homes.
The value accretive decision, backed by Virgin Media O2’s shareholders, Liberty Global and Telefónica, has been taken following recent deployment trials, a thorough analysis of alternative network scenarios and the potential opportunity to enter the fixed wholesale market.
Lutz Schüler, CEO of Virgin Media O2, commented:
“Our mission is to upgrade the UK, and we are doing exactly that. This major new fibre upgrade programme will see us begin the next evolution of our network, building on the investment, firepower and leadership we already have and ensuring we’re fibre fit for the future.
“Right now, we have the UK’s leading gigabit network, and this upgrade means we’ll be even stronger for the decades ahead, pursuing new opportunities and putting words into action
“In 60 days since the formation of Virgin Media O2, we have achieved a lot, but this is just the beginning. With strong foundations for growth in place, we will boost connectivity, provide greater choice and be a challenger the country can count on.”
Maintaining gigabit leadership while preparing network for the future
Through the combination of DOCISIS 3.1 cable and FTTP technology over the coming years, Virgin Media O2 will sustain its long-held speed leadership while preparing its network for the future.
The company will continue to maintain and develop its cable network during the upgrade period, which includes meeting its 2021 gigabit targets and utilising the network’s multigigabit capability to deliver speeds above 2Gbps in future.
By the end of this year, Virgin Media O2 will deliver speeds of 1.1Gbps across its entire network, meeting the Government’s stated broadband targets four years ahead of schedule. The company will also continue to expand its fibre footprint to new areas through its Project Lightning programme and is actively exploring further expansion opportunities to reach millions more premises, with discussions ongoing with strategic and financial partners.
Efficient and value accretive rollout economics
By utilising the company’s fully-ducted network, which are the tubes through which fibre can be laid, the upgrade will be one of the UK’s most efficient fibre rollouts, costing ~£100 per premises passed. Customer installation costs will be in addition to this, with installs operated on an on-demand basis as rollout and revenue enhancement opportunities commence.
This compares to approximately ~£60 per premises for an upgrade to a full DOCSIS 4 cable network and eliminates the need to invest in future versions of DOCSIS as the demand for faster speeds and capacity continue to rise.
Total upgrade costs over the estimated 7-year life of the project will represent a modest annual increase to Virgin Media O2’s current capital expenditure budget of approximately £2 billion per year. These expenditures do not adjust for any of the revenue benefits that are expected to accrue to Virgin Media O2’s consumer, enterprise and wholesale businesses from the FTTP upgrade.
Solid financial and operational foundations in Q2 results
This announcement comes as Virgin Media O2 reports its Q2 2021 pro-forma financial results – its first set of results since the business was formed on 1 June.
The results highlighted the operator’s early convergence strength, with more than 40% of Virgin Media O2’s broadband customers also taking a mobile contract. The business’ fixed network has now been expanded by 2.5 million premises through Project Lightning with 5G services reaching almost 200 locations and 4G capacity upgraded in 45,000 postcodes since the start of the year.
The company added 36,000 broadband subscribers in Q2, increased its fixed-line customer base to 5.7 million and added almost a million mobile connections in the quarter when taking into account Internet of Things (IOT) SIMs and services provided to other operators, such as giffgaff and Sky Mobile, on the O2 network. Transaction Adjusted EBITDA, a measure of profitability, rose by 6.2% vs the prior year with revenue increasing by 1.5% from Q1 2021.