2023 proved to be a rollercoaster year for the UK's fibre alternative network (altnet) industry. Characterised by a mix of triumphs and challenges, mergers and bankruptcies, the year saw the 'big 5' altnets solidify their influence and market position, while smaller players grappled for a foothold in an increasingly competitive landscape. In this comprehensive annual state of the UK fibre market update 2024, we explore the UK fibre market to assess the performance of the top 10 altnets, alongside the collective impact of major players like Openreach and VMO2.
Our analysis extends to identifying the altnets that have made significant contributions to the UK's fibre expansion, examining fibre build rates, the average cost per premises passed, and the critical overbuild index. Furthermore, we explore emerging trends, investment dynamics, and the evolving competitive scenario, providing a nuanced understanding of the sector's direction in the coming years. This report is not just a snapshot of the current state, but a foresight into the future of UK's fibre landscape.
The top 10 have passed an additional 3.2 million premises and account for 80% of premises passed
Our analysis, based exclusively on public data, reveals that the top 10 altnets in the UK have collectively reached 8.6 million premises, a significant increase from the 5.4 million reported at the same time last year. This represents a growth of 3.2 million premises, or 37%, over the previous year. When we expand this view to include the top 21 altnets, the total number of premises passed rises to approximately 10.3 million.
The upper level of these top 10 altnets is led by CityFibre, Hyperoptic, Community Fibre, Netomnia, and Gigaclear. Together, these five entities are responsible for 80% of the premises passed by the top 10 altnets and 67% of those passed by the top 21 altnets.
In terms of rankings within the altnets, the top three positions – led by CityFibre, Hyperoptic, and Community Fibre – have remained stable. Netomnia has climbed to the fourth spot, while Lightspeed and F&W Networks have made their way into the top 10. Conversely, Trooli, Jurassic, and toob have fallen out of the top 10. It's important to note, however, that current and comprehensive data for Lightspeed and G.Network are not available in the public domain.
CityFibre’s market share is declining despite stepping up its build programme
While CityFibre remains the most influential altnet in the UK, its relative market share is gradually declining, a trend we observed in last year's update. Last year, CityFibre was responsible for 37% of the premises passed by the top 10 altnets, a figure that has slightly decreased to 35% this year.
This shift in dominance occurs even as CityFibre has substantially accelerated its build program. The company's build rate has surged from an average of 25,000 to a notable 83,333 premises per month. In comparison, Hyperoptic and Community Fibre exhibit similar build rates, each around 41,000 premises per month, with Netomnia closely following at 37,500 premises per month.
Overall, there has been an increase in the construction pace of the top 10 altnets. Our research indicates that the collective average monthly build rate of the top 10 altnets climbed to 259,583 premises by the end of 2023, a marked increase from the 194,000 rate observed at the end of 2022.
Altnets surpass Openreach’s build rate marking a major market shift
The current market dynamics signify a pivotal change. Openreach is now constructing at a pace of around 240,000 premises each month, marking an increase from the 208,000 reported by us in the same period last year.
Notably, this is the first instance where the collective build rate of the top 10 altnets has surpassed that of Openreach, illustrating a considerable shift in the market's momentum. VMO2's fibre expansion through Nexfibre is reportedly covering approximately 250,800 premises each quarter, which breaks down to about 83,600 per month— a figure notably akin to CityFibre's rate.
At the end of 2022 we reported that the collective number of premises forecast to be built by the top ten altnets and the incumbents Openreach and VMO2 in 2026/27 was 78 million. This has dropped by around 8 million premises (or 10%) to 70 million premises, largely driven by scaled back ambitions by the altnets.
The top 10 altnets now project to expand their build-out to approximately 22 million premises by 2026/27, a decrease from the 30 million forecasted at the same time last year. When this figure is combined with the efforts of the top 21 altnets, the total number of premises expected to be reached is around 77 million.
Scaled back build numbers will mean fewer homes expected to have access to altnet fibre
Despite the UK having only 28 million households, it seems that there is a noticeable level of overbuild in network construction. Current estimates suggest that each UK home could have access to an average of 2.48 fibre connections.
This 'overbuild index' has decreased from the previous estimate of 2.78 to 2.48, indicating that the revised strategies of alternative network providers are beginning to influence the landscape.
It is important to note, however, that the overbuild index is intended solely for high-level trend analysis and does not reflect specific geographic patterns of deployment. For instance, while many rural homes may have no fibre access at all, urban residents might have the option of three or more fibre providers.
Altnet investment tops GBP 14 billion
The overall investment by the top 10 altnets has seen an increase. As of the end of 2022, the top 10 altnets had an estimated secured investment of GBP 12 billion, which has now risen to just under GBP 15 billion. When this figure is correlated with the forecasted number of premises to be covered by 2026/27, the average cost per premises passed is derived to be GBP 671, a significant increase from the GBP 397 figure at the end of 2022. This change appears counterintuitive, considering the scaled-back build numbers, yet the increased investment might reflect the rising costs of materials and labour. We plan to monitor this trend closely and provide further clarification in our mid-year update.
In conclusion, the UK fibre market is at a critical juncture, with growth tempered by strategic recalibrations driven by external conditions. The coming years will likely see continued evolution, driven by technological innovation, market competition, and consolidation, requiring operators to be agile, informed, and strategic in their approach.
About Intelligens Consulting
Intelligens Consulting is a multiple award-winning telecoms, smart city and digital transformation management consulting firm to investors, operators and public bodies. We significantly aid operators and altnets in optimising their build strategies and maximising return on investment. This includes developing and reviewing strategies for corporate growth and infrastructure, supporting transactions for financing and M&A activities and analysing regulations and policies. In addition, Intelligens Consulting can provide crucial insights into environmental, social, and governance (ESG) factors, assist with Project Gigabit bids, and develop comprehensive market strategies, including competitor analysis, pricing reviews, and product strategy. Please contact us on info@IntelligensConsulting.com should you wish to discuss anything discussed in this article or if you should require our support. Download the full article and infographic below.