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According to Karen Egan, managing director for telecoms at Enders Analysis, "the fit is better" with CityFibre because there is "very limited overlap" between the two networks. With VMO2 and its fiber joint venture nexfibre, there would be 50% overlap with Netomnia. 

But, she added that CityFibre is likely able to offer "very limited cash" and more equity for such a transaction. "So, [it's] better industrial logic [with CityFibre], but in this market, it's difficult to compete with cash," she said.

Egan, with Enders Analysis, noted that nexfibre has recently slowed the pace of its network build. The decision has to do with "the struggle to get the right commercial return on self-build, and looming opportunities to pick up altnet networks more cheaply than the cost of building itself," she said.

Alt net mergers often involve a good chunk of equity, according to Enders Analysis analyst Karen Egan. “We would expect less than £500 per home passed to be paid in anything like hard currency,” she told Bloomberg.

“There will be considerable overlap between Netomnia and Nexfibre, probably more than 50% which would bring down the price worth paying even more,” Egan said.

After a post-pandemic investment boom that funded the high cost of installing fibre lines, the sector is now struggling with higher interest rates and more than £8bn of net debt, according to Enders Analysis estimates. 

“Fintechs are blurring the lines between banking, payments, and connectivity,” said James Barford, head of telecoms research at Enders Analysis. “They already control the digital interface with consumers — moving into mobile services is a natural extension of that ecosystem.”

In a recent note, Enders Analysis said it was “perverse” for ministers to pursue a tax that would have a chilling effect on investment while simultaneously encouraging and even subsidising network build.

Karen Egan, from Enders, said the Government’s approach to the telecoms sector “seems quite muddled”.

She added: “It is little wonder that the quality of all sorts of networks in the UK are behind where they should be given a more than 50pc tax on investment in them, on top of highly restrictive planning laws, which also add considerable expense and delays.

“The Government promised that their reform of the business rates system would better incentivise investment, yet they seem to be going down a route which will penalise the high-priority digital infrastructure sector that requires billions of investment a year to upgrade the UK’s networks.”

Sources said the streamer has enjoyed some success in Spain, where it has a deal with Telefónica’s Movistar Plus+. François Godard, a media and telecoms analyst at Enders, said SkyShowtime is heavily reliant on these distribution deals in a crowded market. “It’s like the fifth brand of Coca-Cola in the supermarket. It may be good, but you have to notice it to try it,” Godard argued.

He added that industry consolidation will lead to uncertainty for SkyShowtime. Paramount has merged with Skydance since SkyShowtime launched, and David Ellison’s studio is now tabling bids for Warner Bros. Discovery, which has a significant rival to SkyShowtime in HBO Max. Comcast, meanwhile, recently sold Sky Deutschland to RTL, meaning there is “so much in the air” in terms of Sky’s presence in Europe, said Godard. “It’s difficult to think of SkyShowtime not being impacted by M&A in the future,” he added.