Liberty Global announced two high-profile acquisitions yesterday (February 18).

The company agreed a deal to buy out Vodafone’s stake in their Dutch telecoms joint venture, VodafoneZiggo, while the group, along with Infravia and Telefónica, announced it will acquire Substantial Group for £2 billion ($2.69bn) through their existing joint venture, nexfibre.

Liberty Global will pay Vodafone €1 billion ($1.18bn) in cash for Vodafone’s stake in the Dutch JV, VodafoneZiggo.

The announcement follows reports last year that Liberty Global was interested in buying Vodafone’s stake.

Liberty Global and Vodafone formed VodafoneZiggo in 2016 via merging Vodafone Netherlands and Ziggo. The telco serves around six million mobile subscribers.

As part of the agreement announced yesterday, Vodafone will also receive a 10 percent stake in a new Benelux company to be named Ziggo Group, which will hold Liberty Global’s interests in VodafoneZiggo and Telenet in Belgium.

As such, both VodafoneZiggo and Telenet will continue to operate under their current brands and credit silos, with their experienced management teams focused on delivering their respective strategic growth plans.

Liberty Global stated that the agreement will enable the company to fully unlock the value of its Benelux operating businesses for shareholders, while there’s plans to list Ziggo Group locally in 2027 on Euronext in Amsterdam and to spin off the 90 percent held by Liberty Global to its shareholders.

“This transaction marks a significant milestone in our decades-long commitment to the Benelux region and is fully aligned with our strategy of unlocking long-term value for shareholders,” said Mike Fries, chairman and CEO of Liberty Global.

“By combining these assets, we are creating a regional powerhouse comprised of two converged national FMC champions operating in rational markets – an attractive platform with strong prospects for sustained free-cash-flow generation. We are excited about giving shareholders the opportunity to participate directly in Ziggo Group’s future growth and value creation.”

For Vodafone, the transaction represents another divestment from a European market, with the UK telco consolidating its European operations.

Last year, the carrier finalized its exit from Italy with a sale of its Italian business to Swisscom, shortly after completing the sale of its Spanish business to UK investment firm Zegona.

Altnet consolidation in UK

Meanwhile, in the UK, Liberty Global’s planned acquisition of Substantial Group paves the way for more alternative network (altnet) consolidation in the market.

The deal will bolster Virgin Media O2’s fiber footprint, with the acquisition to be carried out via Gran Via, Liberty Global, and Telefónica’s joint venture, nexfiber.

According to Liberty Global, the deal will unlock £3.5bn ($4.7bn) of investment in the UK market.

Founded in 2019, Substantial Group, owned by investors Advencap, DigitalBridge, and Soho Square Capital, is the UK’s second-largest alternative fiber provider. The group is expected to pass more than 3.4 million premises with its fiber and have more than 500,000 customers by completion.

Liberty Global said the acquisition will provide the company with the opportunity to combine nexfibre with Substantial Group’s fibre network (Netomnia) to “create a scaled, financially secure challenger to BT Openreach.”

The company aims to expand its nexfibre footprint to around 8 million premises by the end of 2027. Combined with Virgin Media O2, which is co-owned by Liberty Global and Telefónica, the two networks will collectively reach 20 million premises.

As part of the deal, Infravia, Liberty Global, and Telefónica are committing £1bn ($1.35bn) in new net funding for nexfibre to fund the transaction. This is made up of £850m ($1.1bn) from Infravia and £150m ($201m) jointly from Liberty Global and Telefónica, with Virgin Media O2 committing traffic on 4.6m overlapping and adjacent homes.

“By bringing our strengths together, we are creating a scaled and financially secure wholesale fibre challenger to BT Openreach – one that will enhance competition, strengthen the UK’s digital infrastructure, and deliver greater choice and quality for consumers and businesses,” said Infravia, Liberty Global, and Telefónica’s CEOs in a joint statement.

Is it a good thing for the UK’s altnet market?

“The deal fires the starting gun on an expected major shake-up of the UK broadband market as industry sentiment shifts from build to buy,” said Kester Mann, director of consumer and connectivity, CCS Insight.

“For Virgin Media O2, the deal enables it to expand its footprint more quickly, strengthening its position as the closest challenger to BT’s Openreach arm. However, there is also a significant network overlap that raises questions over the hefty £2 billion price tag agreed.”

The planned acquisition hasn’t been welcomed by all quarters, however, with CityFibre CEO Simon Holden concerned that it will harm competition.

CityFibre is the biggest altnet in the UK, currently challenging Openreach and Virgin Media O2’s fiber build-out duopoly.

“There is an 80 percent overlap between these two players and, if the deal goes ahead, it would significantly reduce competition and the choice available to consumers, as well as force hundreds of thousands of Netomnia customers back to VMO2. Given the scale of this overlap, the CMA must thoroughly examine the deal,” said Holden in a statement sent to DCD.