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.

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.

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.
 

The 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.
 

On 3 June 2025, Enders Analysis co-hosted the annual Media and Telecoms 2025 & Beyond Conference with Deloitte, sponsored by Adobe, Barclays, Salesforce, Financial Times and SAS.

With over 700 attendees and more than 50 speakers from the TMT sector, including leading executives and industry experts, the conference focused on how new technologies, regulation, and infrastructure will impact the future of the industry.

This is the edited transcript of Session Three, covering: Vodafone’s strategy; BT’s strategy; the future of fibre; and challenges and opportunities for telcos.

The slowdown in telecoms traffic volume growth post-pandemic has persisted for far longer than a simple hangover effect would imply, and has spread from fixed broadband to mobile in many markets

The eventual emergence of the metaverse and/or AI-generated traffic may mitigate this trend, but it is hard to see growth ever returning to a sustained 30%+ per annum level, with around 10-15% likely to prove the new normal

While far from disastrous for telcos, it does have important implications, such as the need to structure pricing more carefully, focus on network quality over capacity, and be more wary of the threat (or opportunity) from MVNOs, FWA and satellite

VMO2 reported solid financials in Q1, with revenue and EBITDA growth both improving and both (just) ahead of full year guidance.

Subscriber momentum however was poor across fixed and mobile, despite customer service improving, with broadband in particular likely to get worse as network buildout slows.

Meeting full year guidance is still achievable, but will likely require a significant altnet slowdown sooner rather than later in the year.

Service revenue growth remained firmly negative at -1.0% in spite of inflation of +2.1%, as competition remains intense and pricing power weak.

Operators are guiding to a 2025 EBITDA performance that is broadly in-line with, or weaker than, their 2024 performance, with SFR choosing to abstain from guidance this year.

In-market consolidation cries are getting louder, with France, Italy and Germany the most obvious candidates.

2024 was the first year in history in which the network operators lost contract subscribers. MVNOs added 1.7m.

In-contract price increases are dominating revenue trends, with a somewhat flatlining outlook on an underlying basis but boosted by accounting technicalities.

We expect the Vodafone3 merger to close on 1 of May which has implications for buyout timing and will prompt higher capex, some early network upsides, and big strategic decisions for both Vodafone3 and BT/EE.

Most regulations within the TAR26 condoc were continuations of the previous pro-investment regulations, albeit with little progress made on copper withdrawal, no extra help for the struggling altnets and a number of unexpected twists at the margin. 

Within the detail, the most significant hit is the return of cost-based price controls to some leased line charges, and across all of the proposed changes, Openreach has on balance fared worse than retail ISPs, albeit at a scale that is manageable within the BT Group.

Ofcom showed no inclination to offer any extra help to the struggling altnet industry, regarding its inefficiencies as being its own (and its investors’) problem, with consolidation the only sensible path forward for most.