On a long road to recovery: UK broadband trends Q1 2026

Altnet ARPUs are much lower than those of BT and VMO2, the premium-brand incumbents, but not so much lower than TalkTalk, and they are not rising appreciably over time.

Altnet ARPU is generally much lower than premium-brand incumbents both because their prices are lower, and because of the type of customers that low prices attract. Maturity will not solve these issues.

With incumbent and altnet pricing remaining low, there appears to be little potential for the altnets to meaningfully improve ARPUs, leaving their economics fatally stretched.

G.Network and Gigaclear have emerged from debt distress to (seemingly) carry on as before, with sales processes having failed, and a reset that may end with a not-dissimilar outcome.

The altnet consolidation game appears to be in stalemate as VMO2/nexfibre seeks approval for its Netomnia acquisition, but this will result in continued cash burn, with which investors may lose patience.

Altnet pricing is broadly staying low, as they balance the need to maintain subscriber momentum and conserve cash, resulting in continuing pricing pressure on the ISP incumbents.

Broadband market revenue growth slightly worsened in Q4 to -1.4% as volume and ARPU pressures persist.

The altnet outlook remains highly uncertain with multiple developments pointing in different directions.

Continued market decline into 2026 is likely, with a coherent (and sustainable) altnet future likely to take some time to emerge.

VMO2/nexfibre has agreed to buy Netomnia, in a complex multi-party deal involving additional wholesale deal components between VMO2 and nexfibre which will leave nexfibre wholesaling 8 million premises to VMO2, or c.40% of VMO2’s overall footprint.

The purchasers are hopeful of an easy regulatory clearance, but we fear the process may be more protracted given the high overlap and removal of a major competitor.

The impact on VMO2 and other incumbent players is prima facie positive, given that it takes out a major subscriber gainer, but we fear that it will be structurally unhelpful, with the high price encouraging other altnets to continue to disrupt in the hope of a similar take-out.
 

Broadband market revenue continued to decline by 1% in Q3, thanks to stagnant broadband volumes and weak ARPU growth. 

Pricing is declining at 5-10% per annum as a modest retail altnet slowdown is countered by TalkTalk losses moderating, and competitive pressure remains intense.

Recovery looks very much dependent on the retail altnets consolidating into a more sustainable wholesale model.

Altnet losses expanded to £1.5bn in 2024, as EBITDA losses persisted and interest costs rose sharply, with ARPUs weakening and operating costs stubbornly high, and the increasing interest burden looking unpayable under any reasonable scenario.

Even the best performing altnets can barely make EBITDA breakeven, and not make sufficient margins to cover ongoing customer acquisition investment, resulting in a perpetual cash drain for their investors.

The 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.