Enders Analysis says some British altnets will never be profitable due to a powerful combination of factors and welcomes consolidation – if only it were that easy
Altnet losses expanded to £1.5 billion in 2024, according to a new annual report by Enders Analysis. Research found that alternative fibre network providers faced a tough adverse conditions as earnings before interest, taxes, depreciation, and amortisation (EBITDA) losses continued while interest charges and operating costs rose sharply, but the average revenue per user fell. It stated, “The increasing interest burden [is] looking unpayable under any reasonable scenario”.
The report noted that even the best performers struggle to break even before EBITDA breakeven and there are not sufficient margins to invest in customer acquisition, “resulting in a perpetual cash drain for their investors”.
Taking action
The excellent ISP Review notes, “In response, many altnets have adopted a more protectionist strategy, which involves scaling-back or pausing new fibre deployments and switching their focus to growing customer take-up (commercialisation). Some other network operators and investment firms have also gone on a consolidation drive in an effort to capitalise on the difficult climate and grow scale to hopefully generate better returns (e.g. CityFibre), but this has gone slower than some expected.”
For the less strong performers, things are worsening in the short term as prices fall, but on the upside, the analysis thinks this “impact on the rest of the sector is worsening in the short term as pricing falls, but this “should accelerate the inevitable consolidation into a sustainable wholesale model under CityFibre and/or VMO2/nexfibre”.
The hardest word?
Consolidation is easy to say and hard and sometimes impossible to pull off because of the complexities of integration – David Tomalin, CTO of CityFibre. had some illuminating comments about this in his presentation at a Mobile Europe conference earlier this year. Also where networks are heavily overbuilt, that is in cities and other densely populated areas, those looking to sell their networks might be in for a nasty surprise regarding how much potential buyers are willing to pay versus how much it cost to build them.
