Virgin Media has hit out at BT’s rescue of Talktalk as a “stitch up”, warning the deal could further strengthen its rival’s grip on Britain’s broadband market.

BT agreed on Monday to acquire debt-laden Talktalk and its wholesale arm PlatformX Communications out of administration, safeguarding services for 1.5 million retail customers and one million wholesale users. The deal is expected to cost BT around £400m.

But Virgin Media has questioned why BT should be allowed to absorb a major rival just days after competition regulators raised concerns over Nexfibre’s proposed acquisition of Netomnia.

“This has all the characteristics of a stitch up masked as a rescue deal in the public interest”, said a Virgin Media spokesperson.

The company said it appeared competition rules could be watered down so the incumbent could “roll its tanks over competition and further tighten its grip on the market”.

“The logic simply doesn’t add up”, the spokesperson added. “We don’t believe rules should be thrown out the window to allow Talktalk to fall into BT’s lap without a proper process and we will be raising our concerns directly with government and regulators”.

The Competition and Markets Authority (CMA) last week raised concerns that Nexfibre’s planned takeover of Netomnia could weaken competition in wholesale broadband.

Nexfibre has argued the tie-up would create a financially sustainable challenger to BT-owned Openreach and accelerate fibre investment.

BT deal faces competition scrutiny

BT’s Talktalk takeover will itself face scrutiny after culture secretary Lisa Nandy intervened under the Enterprise Act.

The government said the move would allow Nandy to consider wider public concerns once the CMA has reported on the competition implications.

The watchdog has been directed to report back by 19 October.

Kester Mann, director at CCS Insight, said the takeover was a response to an “unprecedented situation”, with continuity of service under threat for Talktalk’s 2.5m customers.

But he added: “Given BT’s strong position in the broadband market, it will inevitably also evoke scrutiny from regulators keen to ensure a fair and competitive playing field”.

BT chief executive Allison Kirkby said on Monday the takeover was the “only viable option” to keep Talktalk customers connected after the heavily indebted provider entered administration.

For customers, however, there will be no immediate change.