After fast-tracking the plans by wholesale full-fibre gigabit broadband network provider nexfibre to acquire Substantial Topco and its subsidiaries – including independent broadband providers (altnets) Brsk, YouFibre and Netomnia – the UK’s Competition and Markets Authority (CMA) has revealed that it has provisionally found factors that may result in a substantial lessening of competition (SLC) in the wholesale supply of fixed broadband services.
It added that it saw the acquisition as representing a landmark deal for the UK fibre market, moreover underpinning the country’s ambitions for the future of its digital economy.
Founded in 2019, Substantial Group is expected to have more than 3.4 million fibre premises and over 500,000 customers by completion of the deal. Substantial Group’s fibre network, Netomnia, is regarded as the UK’s fourth-largest full-fibre network and second-largest UK altnet.
Netomnia undertook a merger with fellow altnets YouFibre and Brsk in the summer of 2024, and the company ended 2024 with 2.08 million premises serviceable, adding 1.27 million in the year in which it made an acquisition that added 255,000 in the final quarter. It had 238,000 premises connected in the 12-month period, representing 171,000 in a year and 48,000 in Q4 2024. Together with YouFibre and Brsk, Netomnia has a target to reach five million UK premises serviceable by the end of 2027.
Commenting on the deal in February 2026, Substantial Group CEO Jeremy Chelot said the “landmark” transaction with Nexfibre represented a natural evolution of the UK’s fibre market. “Consolidation has been inevitable, and this deal creates the scaled, sustainable platform needed to drive genuine wholesale competition,” he said.
“Importantly, our retail brand, YouFibre, will remain post-close, ensuring our customers continue to receive the same trusted service they know today, while benefiting from the financial strength and infrastructure scale this combination delivers. This is about building a stronger future for UK fibre.”
Assessing the deal
On 11 June 2026, Nexfibre and Substantial requested the CMA to make a fast-track reference for an in-depth investigation of the takeover at Phase 2. After studying their proposal, the CMA concluded that the conditions to accept a fast-track reference request under UK competition law have been met, and that it would be appropriate to accept the fast-track reference request and proceed to a Phase 2 investigation.
In a filing explaining its decision, the CMA said that in assessing the competitive effects of the deal it had looked at a wide range of evidence which it has considered in the round in reaching its provisional conclusions.
To determine what impact the acquisition may be expected to have on competition, the CMA considered what would likely happen if the deal did not take place – the counterfactual. The CMA then assessed whether the deal may be expected to result in an SLC compared to the counterfactual. The CMA stressed that the counterfactual had been a key focus of the inquiry and that it had considered the relevant counterfactual for each of Substantial, nexfibre and VMO2.
The assessment considered whether the absence of the nexfibre deal would make it more likely that Substantial would have remained as a standalone entity or would have been acquired by rival CityFibre.
The CMA said that it had considered that it needed to form a judgement as to which of these scenarios is more likely, as these two scenarios could lead to materially different conditions of competition: Substantial does not currently have any wholesale customers, and competes at the retail level through YouFibre; whereas CityFibre would likely wholesale the Substantial network to its current ISP customers (including Sky and VodafoneThree) and sell YouFibre to a third party.
While it acknowledged that forming a judgement on the two alternative scenarios was an inherently uncertain exercise, the CMA noted that the evidence showed that Substantial’s financial outlook has deteriorated in recent years, and while it was a viable option to continue as a standalone entity, this was not attractive compared with a sale at an acceptable valuation.
The CMA said this was reflected in Substantial’s internal documents, including those which consider the strategic options for the business and financial models shared with its investors. The internal documents and financial evidence show that Substantial’s shareholders had a strong incentive to reach a deal with CityFibre (absent the Transaction with nexfibre), and CityFibre was likewise highly motivated to conclude a deal with Substantial.
The CMA also considered evidence on CityFibre’s ability to finance the acquisition on terms acceptable to Substantial’s shareholders. This evidence was said to have shown that CityFibre would likely have been able to raise the required funding for a valuation that was acceptable to Substantial’s shareholders.
Yet considering what it regarded as the relevant counterfactual for nexfibre and VMO2 – particularly in relation to the extent and timing of future network expansion and upgrades, and the extent to which VMO2/nexfibre would compete in the wholesale supply of fixed broadband absent the proposed transaction – the CMA stated that its evidence showed that nexfibre would be unlikely to materially expand its current fibre-to-the-premises (FTTP) network of around 2.6 million premises absent a significant change in market conditions.
Regarding VMO2/nexfibre’s activities in wholesale, the CMA observed that internal documents show “a clear strategic objective” to compete as a wholesale broadband supplier to ISPs and that investments have been made to develop the infrastructure and capabilities to achieve this.
Overall, the CMA’s provisional view was that if the transaction did not take place, VMO2/nexfibre would still compete in the wholesale supply of fixed broadband to ISPs and that all concerned would still compete in the wholesale supply of fixed broadband.
The view presented the most likely scenario as being CityFibre acquiring Substantial’s FTTP network, wholesaling this to its ISP customers and would then selling Substantial’s retail business (YouFibre) to a third party. VMO2/nexfibre would, in the judgement, continue to upgrade its cable network to FTTP and would also wholesale this to ISPs. 31.
Ultimately, the CMA considered the relevant market for the competitive assessment to be the wholesale supply of fixed broadband (including FTTP and legacy technologies from incumbent broadband provider Openreach within the Parties’ combined FTTP network footprint.
In its view, the CMA warned that the nexfibre transaction could give rise to a “significant reduction” in wholesale competition across the parties’ FTTP network footprints. It noted VMO2/nexfibre’s network is fully overlapped by Openreach, around 14% overlapped by Substantial and circa 18% overlapped by CityFibre, with minimal overlap between Substantial and CityFibre.
In the counterfactual, the Substantial network would have been acquired by CityFibre, and would therefore in the CMA’s opinion offer wholesale competition between three providers – Openreach, VMO2/nexfibre and CityFibre – in all these areas of overlap. That would be around a third of the total VMO2/nexfibre network.
Even as it published its findings, the CMA stressed that it was not its final decision, and invited any interested parties to make representations on these provisional findings by no later than 5pm on Friday 23 October 2026.
In a joint statement nexfibre’s shareholders slammed the CMA’s report as not reflecting the commercial and competitive reality of Britain’s fibre market, failing to prioritise the fibre investment the country needs, and the creation of a scaled, sustainable challenger to Openreach.
“In its Strategic Steer to the CMA, the government states that it ‘expects the CMA’s approach to clearly, and unambiguously, reflect the need to enhance the attractiveness of the UK as a destination for international investment’. This deal unlocks £3.5bn of international investment, which would increase consumer choice and support the faster roll-out of full fibre broadband nationwide,” the shareholders said.
“Standing in the way of this deal would suggest that Britain is closing the door on international investment, further entrenching Openreach’s monopoly, and leaving consumers to pay the price. We will continue to engage constructively with the CMA to secure an outcome that backs sustainable competition, investment and growth.”
Not surprisingly, CityFibre welcomed the CMA findings. A spokesperson said: “The CMA is right that this proposed transaction would significantly reduce competition and risks the benefits being delivered for UK consumers: faster speeds, greater innovation and lower prices. After recognising that harm, it is vital that the CMA takes the next step and blocks the deal.”
