Consolidation looming as UK altnets losses soar to $1.8 billion

Consolidation looming as UK altnets losses soar to $1.

• UK altnets reported a $1.8 billion net loss in 2024, widening from $1.6 billion the previous year, showing a worsening financial situation for the sector.
• Consolidation options such as potential mergers, especially involving major players like Virgin Media O2 and Netomnia, are being discussed as a means to stabilise the market.

What happened: Financial strain deepens for UK altnets as losses rise to $1.8 billion in 2024

The UK’s alternative network sector (altnets) is facing a financial crisis, with new figures from Enders Analysis revealing a $1.8 billion net loss for the sector in 2024, up from $1.6 billion in 2023. This marks a continuation of the trend of mounting financial strain, with high operating costs, rising interest rates, and a weakening average revenue per user (ARPU). Industry expert James Barford, Head of Telecoms at Enders, highlighted that what started as typical start-up losses have now evolved into persistent and growing losses for many altnets.

According to Enders Analysis, even the top-performing altnets are barely breaking even at the EBITDA (earnings before interest, taxes, depreciation, and amortisation) level, unable to generate sufficient margins to cover their customer acquisition costs. The cash drain on investors is growing, and the report reveals that several altnets have used adjusted definitions to claim EBITDA positivity, with only one company—Hyperoptic—meeting the conventional definition of EBITDA positive in 2024, with a modest 2% margin.

One notable shift in strategy came from Hyperoptic, which, mid-year, decided to pull back from its own network expansion and contracted Openreach to extend its footprint, reflecting the pressure the UK market is under.

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Why it’s important

With mounting losses, the only viable option for many of the UK’s altnets may be consolidation. James Barford from Enders Analysis stated that the sector’s troubled players could benefit from merging with larger, wholesale models like CityFibre or Virgin Media O2’s nexfibre. Recent reports suggest that Virgin Media O2 may be in talks to merge with Netomnia, the second-largest altnet in the UK, in a deal potentially worth $2.4 billion.

These mergers and acquisitions could reshape the UK telecom landscape, consolidating the market and potentially providing more financial stability to struggling altnets. However, there are doubts about the feasibility of such deals at the projected price points, with industry experts suggesting that a more realistic valuation could be $850-$1,080 per home passed.

Consolidation could not only alleviate the financial pressures but also streamline operations, creating a more sustainable environment for the sector.