Proactive Investors - The UK’s high-speed broadband sector is heading down a one-way path to a “widespread consolidation” of its smaller players, prominent BT (LON:BT) Openreach rival CityFibre has predicted.
“Given the financial pressures on the market and specifically the challenges for smaller players to raise capital to support their growth, we believe that widespread consolidation of UK alt-nets is inevitable and that as the largest challenger to BT Openreach, we will play a leading role,” said Cityfibre in its annual statement.
At the wholesale level, the UK broadband market comprises two big players – BT Openreach and Virgin Media O2 – alongside a litany of alternative networks, or ‘altnets’.
Cityfibre is the largest altnet competitor in the full-fibre space.
Its network passed 3.6 million connected premises by the end of 2023, 3.2 million of which were ready for service.
In comparison, Hyperoptic, the second largest of the altnets, surpassed 1.5 million homes in the same period.
However, Cityfibre has a lower rate of take up in proportion to its network footprint compared to Hyperoptic.
There were 337,000 homes connected to Cityfibre at the end of 2023 compared to 310,000 connected to Hyperoptic.
Part of Cityfibre’s build-out success is its involvement in the government’s £5 billion ‘Project Gigabit’ rural connectivity programme.
CityFibre has brought in over £782 million in government subsidies via this programme.
But both Cityfibre and Hyperoptic are facing financial stress.
Hyperoptic nearly doubled its losses in 2023, while Cityfibre’s losses, per recently published financials, soared to £419 million from £94 million the previous year.
In both instances, significantly higher financing costs, coupled with the expense of building out their networks, contributed to the losses.
Cityfibre has a stated ambition of escaping from the ‘altnet’ stigma to become Britain’s third mainstream broadband infrastructure provider.