Virgin Media O2 reportedly turned its attentions to a possible take over of broadband provider Cityfibre around four months after dropping its interest in buying rival company TalkTalk for £3 billion.

The Telegraph reported Mike Fries, CEO of Virgin Media O2 parent company Liberty Global, held talks with Cityfibre boss Greg Mesch and the operator has also employed the services of bankers from US-based LionTree to explore a deal.

Cityfibre is currently in the process of expanding its reach from covering 2 million homes to 8 million by 2025, and notably half of its network overlaps with Virgin Media O2’s infrastructure.

The Telegraph sources estimate the deal for Cityfibre could reach £3 billion, the same price Virgin Media O2 was discussing with regards to buying UK-based fixed player TalkTalk in 2022.

However, it dropped the plans due to market and economic conditions. It had also faced competition to secure a deal for TalkTalk from Vodafone Group and Sky.

A tie-up with Virgin Media O2 could prove an attractive proposition for Cityfibre. The company is shedding around 400 jobs, a fifth of its workforce, due to rising costs. It also raised £4.9 billion in debt financing in 2022.

Both TalkTalk and Cityfibre are facing higher costs in building their broadband networks due to inflation, making it more difficult to compete with BT’s wholesale unit Openreach.