UPDATE 2-Virgin Media O2 to spin out its UK fixed network

(Adds Liberty Global CEO quotes in paragraphs 4-5)

By Paul Sandle

LONDON, Feb 16 (Reuters) - Virgin Media O2 said on Friday it planned to spin out its cable and fibre network, which serves 16 million homes, into a wholly owned new network company to enable it to better challenge BT Openreach, the British market leader.

Virgin Media O2, jointly owned by Liberty Global and Telefonica, owns the second largest network in Britain after BT Openreach, which is used by broadband companies Sky, TalkTalk and Vodafone as well as BT's consumer customers.

Virgin Media said the change would underpin its plan to upgrade all of its customers to fibre. It does not currently have rival broadband providers on its network but it said the move would create a platform for wholesale opportunities.

Liberty Global's Chief Executive Mike Fries said the move created more options to drive potential consolidation in a market where a large number of smaller companies, called "altnets", are building fibre.

"I think it sends a message and a signal to the market that (..) this is going to be a big strategic reorientation of our investment focus," he told analysts on a call.

The mobile network will not be included in the new company.

Virgin Media O2 Chief Executive Lutz Schüler said the move was a "logical evolution" of its fibre strategy and it would reinforce its position as the leading challenger to Openreach.

"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," he said.

Liberty Global said the change was planned for the first half of 2025.

The company also said it would separately list its Swiss broadband and mobile company Sunrise, and it agreed the sale of its jointly-owned TV production company All3Media to Redbird IMI. (Reporting by Paul Sandle; editing by William James and Tomasz Janowski)