Virgin Media O2 has said it will create a new dedicated fixed network company, the first of its kind to challenge BT Openreach in the UK.

The new network company will sit within Virgin Media O2, but as a subsidiary consisting of its cable and fibre assets, purely focused on its fixed network – which includes areas such as broadband.

The UK network provider said the new company would underpin its full fibre take-up and rollout as well as offering the first major alternative to BT Openreach.

It said Virgin Media O2’s other business areas, including its consumer business and mobile network, will remain unchanged.

Lutz Schuler, Virgin Media O2’s chief executive, said: “This is a logical evolution of our fibre strategy that creates a clear, focused and scaled network entity within the Virgin Media O2 family which underpins our shift to a fully fibre network and reinforces our position as the leading challenger to Openreach in the market.

“Working closely with our shareholders, this network business will provide a platform for potential altnet consolidation and wholesale opportunities in future, offering widescale network choice for other providers, as well as giving financing optionality.

“While nothing changes today work is well under way and you’ll hear more from us later in the year.”

Industry expert and analyst Kester Mann, from CCS Insight, said: “Virgin Media O2’s plans to move into the fixed-line wholesale market by offering access to its fibre and cable networks to other providers represents a direct challenge to BT’s Openreach unit.

“Creating a new network company with a dedicated team could enable Virgin Media O2 to pursue merger and acquisition opportunities in the fixed-line broadband market.

“With dozens of alternative providers, the UK is ripe for consolidation and such a move would bring Virgin Media O2 crucial scale benefits.

“Attention will now turn to which providers would consider signing up with the new entity, how it could be regulated and whether there will be any response from Openreach.

“The move should be considered as a positive for UK broadband customers as it creates fresh opportunities for new and existing service providers and long overdue competition to Openreach.”

An Openreach spokesperson said: “We welcome competition as it’s great for customers and it’s what Openreach was established to enable.

“We’re proud to be investing billions of pounds to upgrade the UK’s digital infrastructure and, whilst we’re building further and faster than anyone else, we’re also committed to supporting others who use our ducts and poles to build their own networks.

“We’re confident that the unrivalled quality and breadth of our network, as well as the skill of our teams and the strength of our relationships with customers, will see us continue to be successful and deliver a bright full fibre future for the UK.”