Clients often seek our insights into the ever-evolving landscape of the fixed telecoms market and its future trajectory. It's important to note that the UK's telecom industry is incredibly dynamic and constantly evolving, which makes it challenging to provide definitive answers. In 2022, the industry experienced remarkable growth and substantial investment. However, a sense of unease prevailed as concerns loomed over supply chains and the availability of essential fibre cable resources. This year, 2023 has ushered in a sombre era, where bankruptcies and declining build numbers are juxtaposed with consolidation and increased investments, creating a complex and contradictory narrative. This article is prompted by recent developments in the industry as we take a closer examination of its current trajectory and the influential factors at play and what this means for the UK fixed telecoms market strategies.
Balancing Growth with Stability
Recent market developments offer poignant examples of the industry's evolution. The delicate balance between growth and financial stability becomes apparent through the challenges faced by alternative network operators.
In the last few months, altnet and broadband ISP Grain Connect announced job cuts and a temporary reduction in network expansion due to the need for additional investment.
In contrast, altnets toob and Highland Broadband announced regional expansion reflecting the growing demand for high-speed connectivity. Simultaneously, the ITS Technology Group secured significant financing to expand its network, and Brsk extended its reach into Lancashire, connecting more communities. In addition, hybrid fibre-wireless operator Voneus acquired the financially challenged Broadway Partners, and absorbed operators SWS Broadband and Cadence Networks into its fold.
On the other side of the spectrum the well-established presence and continuous expansion of established operators underscores the enduring demand for high-speed connectivity and their commitment to meet this demand. VMO2 and nexfibre are expanding their FTTP network in Northern Ireland and Yorkshire while Openreach recently celebrated reaching over 1 million premises in Scotland.
These developments highlight the dynamic and resilient nature of the UK telecom industry. Challenges are met with innovation, and expansion remains a constant pursuit. Given the dynamic nature of the market, it is clear we at the transitory and early stages of industry transformation with the full extent of transformation yet to be revealed.
A Transformative Phase in the Industry
Until recently the telecoms industry was fixated on expanding its infrastructure to reach as many premises as possible, essentially engaging in a geographical land acquisition strategy. The telecom marketplace's competitiveness now extends beyond traditional considerations of coverage.
New dimensions will now come into focus shifting the focus from build numbers to aspects such as service excellence, brand power and cost management – pivotal to drive customer take-up, ensuring sustained profitability and long-term investor returns.
Figure 1 - Customer service, branding and cost management will become essential for telecoms operators to generate sustainable returns
In a hyper-competitive landscape, exceptional service quality, offering a seamless and reliable customer experience, is essential to gain a competitive edge. Operators should invest in customer service: customers retention, repairing faults quickly as well as handling customer complaints efficiently. Ofcom’s annual Customer Service Report identifies areas where the industry needs to improve particularly around call waiting times and complaints handling.
In addition, in a market with abundant choices, and all else being equal brand reputation is also essential. Building and maintaining a brand is foundational for success, as customers gravitate towards companies with trusted and well-known brands. In the quest to establish brands, it's worth recalling an age-old wisdom encapsulated in a widely shared saying—'nobody got sacked for hiring IBM.' This underscores the significance of trust and reliability when customer make buying choices. Operators should enhance their prospects by developing brands that customers can identify.
Further, the latest UK economic figures from the BBC reveal a concerning trend, with general businesses insolvencies in England and Wales rising by 10% compared to the previous year as a result of higher operating costs. Exploring the potential of hybrid fibre-wireless networks may become essential to reduce costs. A hybrid approach can offer cost-effective scalability, rapid deployment, and adaptability, aligning perfectly with the imperative to deliver reliable and affordable connectivity while managing financial resources judiciously.
As the industry navigates change, it must continue to seek opportunities for growth while keeping customer satisfaction, investor returns and cost management at the forefront.
In the upcoming year, we will release our highly popular "State of the Fibre Market" research providing an analysis of UK trends encompassing fibre investments, build forecasts, cost per premises passed, and, naturally, the overbuild index.
About Intelligens Consulting
Intelligens Consulting is a telecoms, smart city and digital transformation management consultant to investors, operators and public bodies. Our expert and senior team is experienced in networks, strategy, economics, procurement, and financing. Please contact us on info@IntelligensConsulting.com should you wish to discuss anything discussed in this article. Download the article below.