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The latest annual report from analyst firm Enders Analysis – seen by ISPreview – has calculated that the UK’s largest alternative gigabit broadband networks (i.e. BT / Openreach challengers) collectively suffered losses of £1.5bn in 2024 (up from £1.304bn in 2023 and £755m in 2022) – driven by high interest rates and rising build costs. But it suggests that many may never make a profit.
According to Enders, the industry has now accumulated a total debt pile of £9bn and financing costs equated to an average 121% of revenue being generated last year. The average FTTP network penetration rate across the industry now stands at about 15% (up slightly from 12% in 2023), with most being a long way from the 40% seen by Enders as the level needed to become sustainably profitable (take note that 40% is not a hard rule and will vary, depending on cost to build and the type of areas being built across – e.g. rural often delivers higher take-up, but costs much more to build).
Regular readers won’t be surprised by this, as ISPreview has often reported on the challenges being experienced by network operators over the past three years. The situation has been fuelled by rising build costs, strong competition from rivals (i.e. overbuild and the challenges of growing take-up) and the difficulties of securing fresh investment during a period of high interest rates (not to mention rising debt repayments).
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.
Extract from Enders Analysis Report
Looking forward, for retail altnets (i.e. all except CityFibre) the outlook remains very bleak. The ISP incumbents are starting to respond to market share losses to the altnets, with average incumbent new customer pricing down c.7% year-on-year in the September 2025 quarter, and some altnets having to respond with even cheaper prices of their own, so improved ARPU [Average Revenue Per User] looks unlikely, and increasing use of contract buy-outs is putting upwards pressure on SACs [Subscriber Acquisition Cost]. By our estimates, at current ARPU and SAC levels even a theoretical highly efficient altnet cannot make a return on new customer acquisition even with all network coverage capex written off.
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CityFibre, the largest altnet and the only one purely focused on wholesale, is in a slightly different position, with the Sky wholesale win giving it a realistic prospect of getting to 40-50% penetration levels, and its Q3 subscriber net adds nearly doubled on recent trends. Its economics based off 2024 metrics are still very weak, with ARPU of £15 and a calculated £240 connection ‘bonus’ per new subscriber, which make it very hard for it to make money even if it writes off its coverage capex.
One catch is that consolidation remains a very complex business, not least due to the inevitably slow and expensive process of needing to integrate different networks that may not have been built to the same standard. In addition, some network operators, such as those that exist in more heavily overbuilt areas, may have an inflated opinion of their own asset value, which can make it harder to reach an agreement.
In addition, it’s also clear that some major UK banks have scaled back their support for altnets, with NatWest and Lloyds being two examples that now seem to be expecting to take some losses on related loans (here and here). “It’s difficult to see a scenario in which retail altnets generate cash returns, even before interest costs on their debt,” said Karen Egan, Head of Telecoms at Enders Analysis.
Overall, it remains a tough environment and there’s still a long way to go before we can see how all of this is going to pan out, but the feeling is that all of the above factors may be starting to reach a crunch point that should help focus minds, drive realism where it’s needed and produce more consolidation. But before that we may yet see more painful restructuring and job cuts, even from some of the bigger altnets.
All the recent talk of consolidation around Gigaclear, Netomnia, CityFibre, nexfibre (VMO2) and others helps to illustrate some of the above points (here and here). But the longer this all takes, the harder the hit for many investors.