CityFibre, nexfibre and the local market definition question
In short: CityFibre has asked the CMA to define the relevant market for the nexfibre/Substantial merger by reference to local fibre footprints, not the national wholesale market. When this note was written the case was at the invitation to comment stage. On 1 July 2026, at the parties’ request, the CMA made a fast-track Phase 2 reference; the statutory deadline is 15 December 2026. The CMA’s interim report of 2 October 2026 provisionally found that the turnover test is met, so jurisdiction does not depend on share of supply, and provisionally found a substantial lessening of competition in the wholesale supply of fixed broadband within the parties’ combined FTTP footprint.
CityFibre has filed a competition submission to the CMA opposing the proposed acquisition by Liberty Global, Telefónica and InfraVia, through their nexfibre joint venture, of Substantial Group (Netomnia, Brsk and YouFibre). The submission turns on a single legal point: how the relevant geographic market is defined. That point shapes the Phase 2 risk on a £2 billion deal that the parties hope to complete in Q3 2026, and it shapes the risk picture for every other altnet-to-altnet transaction in the pipeline. The Bratby Law commentary on the underlying transaction is in our earlier note on the nexfibre/Substantial CMA inquiry and on the broader UK altnet consolidation wave; this note focuses on the local market definition question that the CityFibre intervention forces the CMA to answer.
What stage the CMA case is actually at
The CMA opened the file on 23 April 2026 with an invitation to comment that closed on 8 May 2026. It launched its merger inquiry on 29 June 2026 and, on the parties’ fast-track request, referred the deal for a Phase 2 investigation on 1 July 2026. The case page recorded the file, as at 27 April 2026, as pre-notification, with the Phase 1 deadline marked TBC and the express note that “the CMA has not yet launched its formal investigation”. The 40 working day Phase 1 clock under Enterprise Act 2002 s.34ZA only begins on formal notification. Trade press reporting at that time that described the deal as already “in Phase 1” ran ahead of the record.
Key findings (CMA case page and parties’ announcement)
- Deal value: approximately £2 billion enterprise value for Substantial Group. Source: Virgin Media O2 announcement, 18 February 2026
- Acquirers: Liberty Global, Telefónica and InfraVia, through their nexfibre joint venture; targets: Netomnia, Brsk, Brsk ISP and YouFibre. Source: CMA case page
- VMO2 wholesale traffic commitment: 4.6 million premises, for a 15% stake in nexfibre and £1.1 billion. Source: Virgin Media O2 announcement
- CMA invitation to comment open 23 April to 8 May 2026; merger inquiry launched 29 June 2026; fast-track Phase 2 reference 1 July 2026, statutory deadline 15 December 2026. Source: CMA case page
- Expected completion: Q3 2026, subject to regulatory clearance. Source: Virgin Media O2 announcement
| Indicator | Value | Source |
|---|---|---|
| Enterprise value | ~£2 billion | Parties’ announcement, 18 February 2026 |
| VMO2 stake in nexfibre on completion | 15% | Parties’ announcement |
| Cash to VMO2 for traffic commitment | £1.1 billion | Parties’ announcement |
| VMO2 premises covered by traffic commitment | 4.6 million | Parties’ announcement |
| CMA invitation to comment | 23 April – 8 May 2026 | CMA case page |
| Phase 1 statutory clock | 40 working days from formal notification | EA 2002 s.34ZA |
| Phase 1 deadline as at 27 April 2026 | TBC (not yet running) | CMA case page |
CityFibre’s intervention and the local SLC argument
CityFibre’s submission turns on geography. The position, briefed in trade press, is that the transaction should be assessed by reference to local fibre footprints rather than the national wholesale market. CityFibre points to substantial overlap between the nexfibre and Netomnia footprints, and argues that in those localities the deal removes the only meaningful independent challenger to the BT Openreach and VMO2 incumbents. The CityFibre CEO has framed the consequence in interviews as the risk of re-establishing “an ineffective duopoly” of BT and VMO2 in those areas. The intervention does not argue that fibre consolidation is generally bad; it argues that on the correct market definition, this transaction would substantially lessen competition in those localities.
How the share of supply test and geographic market definition work
The CMA’s jurisdiction depends on a relevant merger situation under section 23 of the Enterprise Act 2002. After the threshold amendments in the Digital Markets, Competition and Consumers Act 2024, the turnover test is met where the target’s UK turnover exceeds £100 million (up from £70 million). The share of supply test is separately met where the merger creates or enhances a 25% share of supply in the UK or in a substantial part of the UK. That test applies to goods or services of any description (section 23(3) and (4)), with the share measured on whatever criterion the CMA considers appropriate (section 23(5)); it does not require an economic market definition. Local market definition matters instead to the substantive question whether the merger may be expected to result in a substantial lessening of competition, which is where CityFibre’s submission is directed. In the event the CMA provisionally found jurisdiction on the turnover test. The CMA’s guidance on mergers jurisdiction and procedure frames both tests.
Geographic market definition in fibre infrastructure is unsettled. UK telecoms market reviews have historically used a national wholesale frame anchored on the Openreach footprint, which fits a national incumbent. It fits less obviously a market in which altnets build only in selected geographies and compete with each other only where their footprints overlap. CityFibre’s submission asks the CMA to recognise that, where two altnets are the only independent fibre alternatives in a given area, the analysis runs at the local level. The analogue, if accepted, is the local-market framework the CMA applies to grocery retail and some energy distribution mergers.
Phase 2 risk and the commercial timetable
Phase 1 has a 40 working day statutory clock once formal notification is filed. Where the CMA finds a realistic prospect of substantial lessening of competition not resolved by undertakings in lieu, the case must be referred for Phase 2 under section 33 of the Enterprise Act 2002. Phase 2 runs for 24 weeks, extendable by 8 weeks. The parties’ Q3 2026 completion depended on a Phase 1 clearance. In the event, the CMA referred the deal for Phase 2 on 1 July 2026 under section 33(1A), at the parties’ own fast-track request, with a statutory deadline of 15 December 2026. The interim report of 2 October 2026 provisionally found a substantial lessening of competition, and on 20 October 2026 the CMA invited comments on possible remedies. The local market definition question is therefore not a doctrinal debate; it is the variable that decides which path the deal takes.
What this means for the altnet M&A pipeline
This is the first large-scale altnet-to-altnet transaction to test the post-DMCCA 2024 thresholds and the CMA’s revised guidance on jurisdiction. Whatever the CMA concludes will read across to every subsequent local fibre deal. A national-market clearance at Phase 1 supports continued consolidation. A local-market analysis, with a Phase 2 reference or structural remedies, raises the cost and timetable of altnet consolidation across the pipeline: detailed local overlap analysis, Phase 2 contingency and remedies optionality move from a tail risk to a base case in deal modelling. The implications run through to lender assumptions, sponsor return models and management retention packages. Regulatory due diligence on overlapping altnet targets turns on the geographic overlap question before, not after, signing.
Viewpoint
CityFibre’s submission is precise. It does not argue that consolidation is bad. It identifies the legal question on which the deal turns and frames the evidence accordingly. The CMA’s guidance on mergers jurisdiction and procedure treats market definition as substantive and evidence-led, and the regulator has applied local market analysis in non-telecoms sectors with similar competitive geometry. On that basis my expectation is that the CMA will at minimum entertain the local frame in Phase 1 questioning, and that whether it adopts that frame as the basis of decision turns on the granularity of CityFibre’s overlap evidence and the parties’ rebuttal on switching at the wholesale layer. For investors and lenders pricing altnet assets with overlapping footprints, the CMA’s response is the variable to track between now and the Phase 1 decision. For the regulator’s role generally, see our explainer on what the CMA does; for the wider M&A picture, see our UK fibre consolidation outlook.
Frequently asked questions
Is the CMA inquiry into the nexfibre/Substantial deal at Phase 1?
No. As at 27 April 2026 the case was at pre-notification, with an invitation to comment open until 8 May 2026. The CMA launched its merger inquiry on 29 June 2026 and, at the parties’ request, made a fast-track Phase 2 reference on 1 July 2026. The case is now at Phase 2, with a statutory deadline of 15 December 2026. The 40 working day Phase 1 clock runs only from formal notification.
Why does local market definition matter for the share of supply test?
Section 23 catches a merger that creates or enhances a 25% share of supply in the UK or in a substantial part of the UK. A region or a city can qualify. Two altnets with overlapping footprints could cross 25% in a substantial part of the UK even where neither is close to that share nationally, but the test does not require an economic market definition, and local market definition matters chiefly to the substantive competition assessment. In the event the CMA provisionally found jurisdiction on the turnover test.
What does a Phase 2 reference mean for a Q3 2026 completion?
Phase 2 runs for 24 weeks, extendable by 8 weeks. The reference made on 1 July 2026 carries a statutory deadline of 15 December 2026 and brings detailed remedies analysis into scope, including possible structural divestitures in overlap localities. The principal commercial consequences are extended financing conditionality and an operational hold on integration.
Update, 2 October 2026: the CMA’s interim report records that Substantial’s UK turnover exceeds £100 million, so jurisdiction rests on the turnover test rather than share of supply. The CMA provisionally treats the market as the wholesale supply of fixed broadband within the parties’ combined FTTP footprint, and provisionally found a substantial lessening of competition. See our analysis of the CMA merger counterfactual in nexfibre/Substantial.
For analysis on UK fibre M&A, regulatory due diligence on overlapping altnet targets, or the CMA’s approach to local market definition in infrastructure sectors, contact Rob Bratby at Bratby Law. Read more about our Transactions practice.
