(Bloomberg) — BT Group Plc shares fell after its biggest rival said it would connect all of its customers to fast fiber broadband, rramping up the competitive threat to the former phone monopoly.
Virgin Media O2 will upgrade its entire network of 15.5 million U.K. connections to fiber optics instead of cable by 2028, the venture said in a statement Thursday.
Until now, Liberty Global Plc’s Virgin Media used fiber mostly to fill gaps in its older cable infrastructure. Following a tie-up this year with Telefonica SA’s U.K. mobile operator O2, the new company said it could achieve the upgrade at a low cost, with greenfield construction accounting for roughly a quarter, by threading fiber through its existing underground ducts.
The announcement steps up the pressure on BT as it tries to convince investors that its own national fiber rollout will give it a competitive edge. The company reported an unexpected rise in first-quarter profit, driven largely by gains at its Openreach division that offers fiber broadband.
BT Chief Executive Officer Philip Jansen has focused on the upgrades to reverse years of disappointing results. The company said in May it will build an extra 5 million fiber optic connections by 2026 and explore funding them with a joint venture, opening up its infrastructure to external investors for the first time. Its announcement Thursday suggests the CEO’s plan to boost profit through broadband gains is picking up steam.
BT shares fell 5.8% at 8:06 a.m. in London.
However, the threat from Virgin Media O2 isn’t limited to the fiber upgrade. The company said its investment decision also gives it the chance to enter the fixed wholesale market, which would see it challenge BT on another front by wooing reseller clients like Vodafone Group Plc and Comcast Corp’s Sky.
The government is leaning on the industry to accelerate the shift to fiber after the pandemic exposed the importance of Britain’s internet infrastructure. Download speeds over legacy cable technology tend to be much quicker than uploads. Upload bandwidth has become vital now more people are using their broadband for videoconferencing and online gaming.
Virgin Media’s network was patched together from several cable companies that merged after a boom and subsequent string of bankruptcies in the 1990s. The company chose to upgrade the legacy network using a process called DOCSIS. The move to fiber is an acknowledgment that this technology has its limits.
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