The UK telecoms market is undergoing a ‘shakeout’ fuelled by a steady increase in merger and acquisition (M&A) activity following a period of rapid growth. This is particularly evident in the fibre sector, where both major and alternative network operators (altnets) are leveraging strategic acquisitions to expand their service footprints and enhance market positions. In this article, we explore the key trends driving UK fibre network consolidation and the implications for competition and customer service - key markers of a vibrant telecoms sector.
Operators Seek To Improve Their Strategic Position
The fibre network industry is at the start of a consolidation and strategic expansion, driven by larger operators acquiring smaller altnets and strong investment from private equity and infrastructure funds, along with crucial partnerships enhancing network reach and capabilities Here are four key trends we have observed in the fibre market recently:
Consolidation of Smaller Networks Operators: Larger fibre network operators are increasingly acquiring smaller altnets. For example, Home Telecom, a subsidiary of the Telecom Acquisitions Group (TAL), recently acquired Neatley, expanding their consumer broadband services. Such consolidations help larger firms expand their service areas and achieve operational efficiencies.
Strategic expansion: Acquisitions serve as a strategic tool for network expansion. CityFibre's recent acquisition of Lit Fibre from Newlight Partners is a prime example, expanding its ready-for-service footprint by 300,000 premises. In February this year, TalkTalk acquired Shell Energy's UK broadband customers, bolstering their FTTH service offerings. Additionally, although not confirmed, Netomnia is linked to a potential takeover of Brsk and acquire its some 450,000 premises passed footprint. If this goes ahead, it would be another example of larger altnets strategically expanding by acquiring smaller operators.
Investment by Private Equity and Infrastructure Funds: UK private equity and infrastructure funds are still playing a significant role in these acquisitions. Speed Fibre Group's sale to UK investment company Cordiant Digital Infrastructure for EUR 190.5m highlights that there is still robust investor interest in the fibre market, driven by its long-term growth potential. Fern Trading’s portfolio of altnets is already being packaged into a challenger to the incumbents and major altnets. It will be interesting to see how other infrastructure funds approach consolidation among similar portfolio companies.
Collaboration: Partnerships and joint ventures are crucial in this sector. Nexfibre's collaboration with Virgin Media O2 to acquire Upp exemplifies this, boosting their fibre network in East England by 175,000 premises. Such collaborations are strengthening infrastructure capabilities and expanding network reach.
We Are Entering The ‘Shakeout’ Phase
Over the last few years the UK fibre market has undergone incredible ‘growth’ linked to over 100 altnets entering the market financed by almost GBP 15 billion in private equity and infrastructure funds. These funds have helped serve underserved markets, with the top 10 altnets accounting for almost one-third of premises passed by fibre.
We are now exiting the growth phase and entering the ‘shakeout’ phase, where inefficient or weaker operators will begin to exit the market, consolidate, or get acquired. This stage will result in a reduced number of operators as consolidation occurs and larger, more efficient firms start to dominate, as we are already beginning to see.
It will be a few years until we achieve maturity and a steady state-equilibrium where the number of fibre operators stabilises and remains constant, leaving a handful of altnets. However, it is useful to explore the implications of this consolidation on competition and customer service.
Competition Will Re-Focus In A Mature Market
Post the shakeout phase, although there are likely to be fewer altnets, competition is likely to focus on maintaining market share in a mature market, improving efficiencies, and incremental innovation.
As the firms grow, their footprints will increase. This increased 'firepower,' combined with greater financial resources, means mature altnets can offer more competitive pricing, invest in innovative technologies, and enhance service quality. Consolidated entities with greater financial strength can also allow for significant investments in state-of-the-art technology and infrastructure, enhancing network capacity and the ability to provide high-speed, high-quality broadband services.
With increased resources, larger altnets can allocate more funds towards maintenance and innovation, ensuring more reliable and faster services. They can also afford to employ more skilled personnel to enhance customer support and operational efficiency. Larger, consolidated altnets will also benefit from economies of scale, reducing costs and enabling them to invest more in network infrastructure and technology upgrades, leading to improved service quality.
So, it would seem that competition will be maintained, and customer service will not be compromised. However, this must be balanced with the fact that smaller altnets – due to their small and agile nature - can typically respond more nimbly to customers than larger firms.
Well Equipped To Support M&A
We have recently significantly strengthened our Transaction Advisory practice, making us well-equipped to provide comprehensive support for M&A activities. Whether you're aiming to acquire or invest in an operator, maximise your value in a buyout or merger, or explore an exit strategy, our team is ready to assist. With extensive experience and deep expertise in the telecoms market, our team includes veteran CEOs, experienced M&A advisors, private equity advisors, and telecom financiers specialising in structuring debt and equity deals. If you are interested, we would be happy to arrange an exploratory call to discuss how we can support your specific needs and leverage our telecom market knowledge to your advantage.
About Intelligens Consulting
Intelligens Consulting is an award-winning telecoms digital and technology management consultant. Our Public Sector practice provides strategic advice and pragmatic implementation support to policy and decision makes. Our Enterprise practice helps businesses optimise digital connectivity and technology for better profitability and growth. Our Transaction Advisory practice provides investors with detailed due diligence. Our Research practice offers bespoke research on market trends and technology. Our Telecoms Strategy practice provides market strategy and growth expansion strategies. Our Programme Delivery practice ensures of successful project outcomes by integrating with client teams. Contact us on info@IntelligensConsulting.com should you wish to find out more about our Digital Transformation Programme or anything else discussed in this article. Find us on You Tube | LinkedIn | Website.
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