BT: Surprisingly strong Openreach
BT started its FY26 with robust financials. Revenue was slightly weak due to handsets and international, but EBITDA was slightly ahead of expectations, and operating metrics were strong.
The highlight was Openreach posting its lowest broadband line losses for over a year despite ongoing altnet pressure, and keeping revenue growth positive despite reduced inflationary price increases.
The altnet threat is still far from over, but it is encouraging that there are signs that it is beginning to wane as the sub-sector moves to a more rational wholesale model.
Related reports
Sky has officially launched on CityFibre’s network, offering up to 5Gbps speeds, which may have more of a halo effect for Sky than driving direct adoption of these very high end packages.
Sky is critical to CityFibre’s wholesale model given its size, and it is a good sign that Sky is proving an enthusiastic wholesale customer, while it is likely to be wary of others.
CityFibre still needs to complete its planned financing round to kick off a wholesale-focused consolidation wave, which would ultimately be beneficial to all incumbents in ending irrational price competition from retail altnets.
CityFibre has announced that its long-awaited £1.5 to £2.3 billion financing round is finally agreed, with it now able to use this money to fund its remaining organic build, integrating acquisitions, and covering operating losses until it reaches cashflow breakeven.
This capital raise will not be the first of many across the altnet sector in our view, as CityFibre’s business model is unique, and now partially dependent on the struggles of others to encourage consolidation.
CityFibre now has all the pieces in place to accelerate consolidation of the altnet sector, which will ultimately benefit the whole sector in ending unsustainable retail altnet competition.
Altnets in the UK: Consolidation endgame
26 June 2025The largest UK altnets are now all at or close to EBITDA positive, but still heavily cashflow negative even pre-interest costs and with paused builds, due to various below-the-line cash costs requiring continuous funding. EBITDA margins of as much as 35%+ are required to actually be cashflow breakeven.
Altnet economics are still challenging even if debts are fully written off, with a payback of more than 5 years on customer acquisition and connection costs alone.
The consolidation endgame is increasingly imminent, with the outcome likely to be a mix of CityFibre/VMO2 acquisitions, stand-alone niche players continuing, and abandoned assets, with the outcome for the rest of the sector more benign under any scenario than current trends.
Fixing an allocation quirk at BT pushed UK broadband revenue back into growth in Q1, albeit a very modest 0.8%, thanks to continued altnet growth and a very weak underlying market.
Broadband pricing is dipping down overall, but there is not yet evidence of pricing cuts targeted in altnet areas, a massive missed opportunity in our view.
The market will remain under pressure in the short term, but in the longer term altnet pressure will fall under all realistic consolidation scenarios.
BT: Broadband gains and losses
28 May 2025BT hit its FY25 guidance of a modest revenue decline coupled with modest EBITDA growth, and expects more of the same in FY26.
The highlight of the results was consumer broadband returning to subscriber growth despite the altnet onslaught; the lowlight was an increasing decline in Openreach broadband subscribers thanks to other Openreach customers (e.g. TalkTalk) not doing so well.
BT’s longer-term outlook and prospects for a dramatic cashflow turnaround remain strong, with Openreach net losses much more likely to improve than worsen over the next year, and further steps taken to divest/isolate erratic non-UK business segments.
Sky has officially launched on CityFibre’s network, offering up to 5Gbps speeds, which may have more of a halo effect for Sky than driving direct adoption of these very high end packages.
Sky is critical to CityFibre’s wholesale model given its size, and it is a good sign that Sky is proving an enthusiastic wholesale customer, while it is likely to be wary of others.
CityFibre still needs to complete its planned financing round to kick off a wholesale-focused consolidation wave, which would ultimately be beneficial to all incumbents in ending irrational price competition from retail altnets.CityFibre has announced that its long-awaited £1.5 to £2.3 billion financing round is finally agreed, with it now able to use this money to fund its remaining organic build, integrating acquisitions, and covering operating losses until it reaches cashflow breakeven.
This capital raise will not be the first of many across the altnet sector in our view, as CityFibre’s business model is unique, and now partially dependent on the struggles of others to encourage consolidation.
CityFibre now has all the pieces in place to accelerate consolidation of the altnet sector, which will ultimately benefit the whole sector in ending unsustainable retail altnet competition.Altnets in the UK: Consolidation endgame
26 June 2025The largest UK altnets are now all at or close to EBITDA positive, but still heavily cashflow negative even pre-interest costs and with paused builds, due to various below-the-line cash costs requiring continuous funding. EBITDA margins of as much as 35%+ are required to actually be cashflow breakeven.
Altnet economics are still challenging even if debts are fully written off, with a payback of more than 5 years on customer acquisition and connection costs alone.
The consolidation endgame is increasingly imminent, with the outcome likely to be a mix of CityFibre/VMO2 acquisitions, stand-alone niche players continuing, and abandoned assets, with the outcome for the rest of the sector more benign under any scenario than current trends.
Fixing an allocation quirk at BT pushed UK broadband revenue back into growth in Q1, albeit a very modest 0.8%, thanks to continued altnet growth and a very weak underlying market.
Broadband pricing is dipping down overall, but there is not yet evidence of pricing cuts targeted in altnet areas, a massive missed opportunity in our view.The market will remain under pressure in the short term, but in the longer term altnet pressure will fall under all realistic consolidation scenarios.
BT: Broadband gains and losses
28 May 2025BT hit its FY25 guidance of a modest revenue decline coupled with modest EBITDA growth, and expects more of the same in FY26.
The highlight of the results was consumer broadband returning to subscriber growth despite the altnet onslaught; the lowlight was an increasing decline in Openreach broadband subscribers thanks to other Openreach customers (e.g. TalkTalk) not doing so well.
BT’s longer-term outlook and prospects for a dramatic cashflow turnaround remain strong, with Openreach net losses much more likely to improve than worsen over the next year, and further steps taken to divest/isolate erratic non-UK business segments.