ARTICLE: Mid-Year 'State of Fibre' Update
Updated: Jul 4, 2022
Since we last published the fibre update in 2021 fibre altnets have secured £billions more investment, fibre availability has shot up and Project Gigabit has kicked off. We present the latest UK fibre availability stats including council areas we consider to be rising stars. We provide a roundup of the latest altnet investments and assess altnet survival strategies to resist competition from incumbents including how Project Gigabit can increase altnet enterprise valuations.
North-south divide continues to play out
Fibre availability across the UK has shot up since December 2021 with an additional 8% of UK premises now served with gigabit capable fibre networks. Six months ago, we estimated that the average fibre availability in the UK was just under 25% - this stands at just over 33% as of June 2022.
Across the UK, Kingston upon Hull remains in pole position with 99.7% fibre availability, however, six of the top ten council areas with fibre availability are in Northern Ireland thanks to aggressive commercial rollout and publicly funded schemes designed to improve broadband in rural areas.
“Fibre availability in London is above the UK average, Scotland is below the UK average”
On a regional basis fibre availability in London is way above UK average at just under 43% however nine out of 33 London boroughs have below UK average fibre availability. Hammersmith takes the top slot with Camden, Newham, Tower Hamlets and Westminster all in the top 5. London boroughs with the most significant growth are Sutton, Islington, Hounslow and Camden where fibre availability doubled or more in the last six months.
Figure 1: Fibre availability by London borough. Source: ThinkBroadband, Intelligens Consulting, June 2022
While fibre availability in London is well above the UK average Scotland is below the UK average which plays into the Government’s Levelling Up agenda. In stark contrast to London where most (23 out of 33) boroughs have above average fibre availability, 21 out of 32 council areas in Scotland have below average fibre availability with the Northern and Western Isles performing worst.
On a positive note, although average fibre availability in Scotland is below the UK average at 29%, it has increased from 22% in the last six months. Aberdeen City has the highest fibre availability with Edinburgh, Midlothian, Stirling and East Ayrshire keeping Aberdeen company in the top 5. Councils with the greatest increase in fibre availability over the last six months include Angus, Dumfries and Galloway, Dundee, North Ayrshire, North Lanarkshire and Renfrewshire councils.
Figure 2: Fibre availability by Scottish Council. Source: ThinkBroadband, Intelligens Consulting, June 2022
Kingston upon Hull, Milton Keynes, Coventry, Peterborough and East Riding complete the top five English councils with the highest levels of fibre coverage.
Committed fibre investments have doubled since December 2021
Previously we have written that the top ten UK altnets have raised investments over GBP 5 billion.
“The top 10 altnets have secured a combined investment total of GBP 10 billion”
We have just revised these numbers based on recent announcements and estimate that the top ten altnets have secured a combined investment total of GBP 10 billion. We estimate that this will serve approximately 20 million premises which equates to GBP 500 cost per premise passed (CPPP). Recently refinanced CityFibre is by far the largest investor (by value) followed by London operator G.Networks and social housing experts Hyperoptic.
Figure 3: Top 10 altnet investments. Source: ISPReview, FT.com, Intelligens Consulting, June 2022
As of June 2022, it is estimated that the top 10 altnets combined have passed just over 4 million premises. These altnets along with BT Openreach and to some extent VMO2 have been responsible for driving up fibre availability. Of the altnets, CityFibre has passed 1.7m premises, over double Hyperoptic and almost three times more than London’s Community Fibre. BT Openreach claims to have rolled out full fibre to 7 million premises and claims to be on track to reach 25 million premises by December 2026.
Figure 4: Premises passed by altnet. Source: ISPReview, FT.com, Intelligens Consulting, June 2022
Altnet strategies will determine if they sink or swim
It is challenging to be certain about how the market - comprising of over 60 altnets - will pan out, although there is consensus among the Intelligens Consulting team, investors and operators that market consolidation activity is inevitable.
Market consolidation may go one of two ways.
Smaller altnets may find themselves as acquisition targets as larger service providers look to expand their footprint. However, many altnets may be too small to ‘move the needle’ sufficiently for the large players and may be overlooked. Consequently, they will need to consider a defensive survival strategy.
“A larger altnet will be more capable of surviving competition from incumbents BT and VMO2”
Alternatively, smaller altnets (in complementary and close geographical proximity to each other) may merge to form a larger scale business benefiting from improved financial performance and their ability withstand competition from incumbent operators such as BT and VMO2.
Smaller altnets should also continue to invest in the physical network to increase geographical reach and create scale as a survival strategy.
Project Gigabit provides altnets with an option to expand network reach and create scale
Project Gigabit is a GBP 5 billion public subsidy grant being made available to altnets to enhance coverage in rural and hard to reach areas. The project is in full swing with ten live procurements estimated to address some 380,000 premises and with many more to come.
Our sources tell us that the Government will be releasing more procurements than originally planned, splitting some large regional procurements into smaller local contracts typically serving up to 10,000 premises which will be more suited to smaller altnets targeting rural areas.
“Project Gigabit can enhance altnet enterprise valuations”
Although responding to these procurements can be resource intensive, based on recent experience it is our view that Project Gigabit can have a material impact upon altnet enterprise value (EV) in addition to securing valuable customers. Naturally, the subsidy also reduces the investment requirements increasing RoI, thereby reducing the payback to within very acceptable norms. We will cover this in more detail in our next Article of the Month.
In fact, not participating in Project Gigabit may allow competitors to landgrab valuable territory, making them more competitive and increasing their profitability, size and EV.
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How we can help
Our expert and senior team of telecoms advisors are experienced in technology, strategy, economics, procurement and finance and have supported ISPs with Project Gigabit and have pioneered local authority interventions to unlock hundreds of millions of pounds of private investment in fibre, 5G and IoT networks.
Please contact us should you wish to learn more about how we can work with you or if you want to discuss anything else discussed in this article at info@IntelligensConsulting.com
Intelligens Consulting is an award-winning telecoms and smart city advisor with a global client base providing investors, operators, and policy makers with technical, strategic, and commercial advice on creating Smart Connected Places and on 5G, IoT and fibre networks. Founder, Iqbal Singh Bedi has advised the most senior government ministers on telecoms policy and our landmark research has been used to inform the UK House of Commons and the Scottish Government on telecoms policy. He also advises investors and operators on their investment and market entry strategies.