The proliferation of altnets changed the fibre landscape in the UK, compelling the incumbent into action. Consolidation of networks, brands and customers is now on the horizon, which could ultimately lead to a more sustainable and competitive market structure.
We believe the much-anticipated wave of consolidation will be driven by one or more of the following reasons: to increase network footprint, largely in an adjacent geographic area; to acquire wholesale or retail customers; and/or because of sub-scale altnets in need of rescue.
The number of deals seen over the past five years has not lived up to either hopes or expectations. The measured pace of transactions exhibited so far has led to four in-family combinations, two mergers and nine full or majority acquisitions. For the dozens of altnets for whom the economics do not stack up, consolidation is inevitable.
Encouragingly, routes to consolidation are emerging, with CityFibre, Netomnia/brsk and Virgin Media O2/nexfibre the expected lead actors. A deal here could initiate the transition to a more concentrated but also a more financially stable market that is better equipped to deliver infrastructure-based competition at scale.
DSIT is a likely advocate of consolidation, while Ofcom has recognised the current fragmentation of competition, which means that some altnets will not survive long-term. The CMA’s stance is less well known, with the merits of each transaction assessed on a case-by-case basis.
Consolidation of the cable industry in the UK and recent M&A in Europe fails to offer much insight into how altnets might eventually come together. Amid a disparate, diverse and competitive fibre landscape, consolidation is increasingly imminent, although some operators would find it more challenging than others to secure regulatory approval.
The much-anticipated merger wave will be driven by one or more of three reasons
Altnets have caused a sea change in the UK’s digital infrastructure landscape. The size and pace of rollout has had a positive impact on competitive dynamics in the fixed broadband market, triggering a reaction from the incumbent. Developments have been underpinned by a regulatory framework that has prioritised incentivising investment in the deployment of multiple fibre networks. However, there are various current and emerging issues facing the altnet community in terms of both supply (funding challenges, high interests costs and opex, increasing overbuild) and demand (lower than hoped adoption), with calls for greater support from Ofcom through the forthcoming Telecoms Access Review (TAR). Many altnets have slowed, or even halted, build programmes, while some have made redundancies or materially discounted retail prices, allegedly to try to prop up short-term penetration.
Consolidation is widely considered a solution to several prevailing headwinds, particularly due to the significant potential synergies and scale it could offer. In this first of a two-part series, we outline a recent history of consolidation among altnets in the UK, the potential protagonists of any upcoming deals and the likely response from policymakers.
A wave of M&A has been predicted – if not willed to happen – for some time, with different eventualities anticipated, from ‘fire sales’ of distressed altnets to an orderly combination of network assets, or a combination of the two. Consolidation is an inevitable (and in certain instances necessary) outcome, which will initiate the transition to a more concentrated market with fewer but ultimately more financially stable operators, and in turn a higher chance of sustainable infrastructure-based competition in the long-run. We primarily expect this process to happen for one or more of the following reasons:
To increase network footprint: A wholesale-only altnet purchases or merges with a rival largely in adjacent geographic areas where it would make more economic sense than to rollout itself;
To acquire customers: A vertically integrated operator acquires or merges with a competitor – whether also vertically integrated or wholesale- or retail-only – within part(s) of its own footprint to boost local market share, or buys or merges with another vertically integrated or wholesale-only altnet in an adjacent area in order to move into a new region of the country; or
Because of distress: A sub-scale, likely overbuilt altnet runs into financial difficulties and is acquired (along with all or part of its retail customer base) by a larger competitor, thereby enabling a degree of market repair to occur.
The number and value of transactions so far have not lived up to expectations
Despite the three motivations we have identified and third-party research suggesting that the vast majority of altnets are seriously considering M&A opportunities, overall deal activity has been markedly more subdued than most envisaged – see Figure 1. Since 2020, we aware of 15 successfully completed transactions, including ‘in-family’ combinations (Netomnia/brsk, County Broadband/Truespeed), mergers (e.g. FullFibre/Zzoomm) and acquisitions, such as those spearheaded by CityFibre (Connexin, Fibre Nation, Lit Fibre) and Virgin Media O2/nexfibre (Upp).
Persistent barriers have hampered deals, but routes to consolidation are beginning to appear
Consolidation, if executed well, could better position altnets to attract funding, unlock investment and compete more effectively with more established players, but a number of factors continue to hold up transactions or prevent them from making headway altogether:
Availability of capital: Altnets are capital intensive businesses and in uncertain times (particularly with respect to take-up and returns), investors may be not be inclined to help fuel M&A;
The cost of servicing debt: As interest rates have risen, the cost of running highly leveraged firms can only accelerate the need for commercialisation of the existing network at the expense of expansion – see Figure 2;
Acquisition and integration costs: The time and resources required to advance merger talks can be off-putting, if not prohibitive, while altnets face financial and technical challenges post-transaction (e.g. in getting processes and systems to align); and
Valuation gaps: Differences in sellers’ valuations of altnets based on their levels of investment and premises passed and buyers’ valuations based on customer adoption, revenue generation and ARPU hinder discussions from progressing.
Nevertheless, there is a (belated) sense that more deals are coming, as reflected in media reporting. CityFibre has long been viewed as a credible aggregator of smaller altnets, with the operator itself suggesting that further acquisitions may be on the cards. After reaching an agreement in July 2025 with shareholders and existing lenders on a £2.3bn financing round, CityFibre arguably has the necessary backing to deliver inorganic growth – although there is a question as to whether it would seek to effect that ambition via cash or equity (the latter being the case in the two latest transactions). Further, Netomnia/brsk has the experience of integrating two distinct businesses and strong investor support, having amassed £1.6bn in funding, as well as the appetite to do more deals in the future in order to create both a bigger network and a stronger competitor at the retail level.
As for the largest operators, Virgin Media O2/nexfibre also has some recent acquisition experience, it has the financial capability and it may now have the platform for additional purchases following the completion of Telefónica’s (one of its parent companies) strategic review. That said, it is unclear precisely how much of a spending spree will come about. Though Liberty Global (the other parent) remains keen to pursue M&A opportunities to “rationalise” the UK market, Telefónica has stated that consolidation is not a core pillar of its new five-year plan, but instead a longer term “upside” – i.e. a complement. Meanwhile, the role of BT Group in shaping the endgame is, at least as things stand, relatively straightforward to deduce. Openreach (its legally separated network division) has stated more than once that consolidation is a “distraction” and that it is focused on building over buying, with the cost of deploying to a given area generally cheaper than acquiring a pre-existing network. In any case, deals that involve the former incumbent would be difficult to get past the Competition and Markets Authority (CMA) unless in very specific circumstances and/or with prescriptive conditions attached, and after a lengthy review period.
DSIT and Ofcom would likely champion consolidation, but the CMA’s position is currently less clear-cut
In this context, it is important to consider the implications of prospective consolidation for policymakers in the UK and their likely positions on, and responses to, any deal. The Government has said fairly little on the matter, but would presumably be broadly supportive. In the 2018 Future Telecoms Infrastructure Review (FTIR), the then Department for Digital, Culture, Media & Sport (DCMS) stated that the most effective and efficient way to deliver nationwide fibre coverage was to promote competition and commercial investment where possible. This mantra was reflected accordingly in the 2019 Statement of Strategic Priorities (SSP) for Ofcom and has carried through to the proposed update published in July 2025. The Department for Science, Innovation and Technology (DSIT) has also stated that there is no ‘magic number’ of fibre operators so long as there is a genuinely competitive environment. If DSIT’s goal is indeed scaled, sustainable competition to the incumbent, it should be understanding that there are dozens of altnets for which the economics will never add up and that a dose of consolidation must be administered, for example to empower investment and to support the overarching growth mission.
Ofcom considers that its regulatory framework has been successful in enabling parallel fibre deployments and in encouraging the proliferation of altnets across the country. It has though recognised the current fragmentation of competition, which means that some operators will not achieve the requisite economies of scale to survive, and rightfully noted that it is not its role to artificially sustain certain operators, but to give each an equivalent, reasonable shot at success. Similar to DSIT, the regulator’s express objective is material, established network competition – something its main TAR consultation in March 2025 stressed has not yet arrived. That consultation also anticipated consolidation, particularly among altnets planning on covering 50,000 premises by 2031, as a likely feature of the market in the coming years, which could result in an enlarged entity (other than CityFibre and Virgin Media O2) that may be able to exert a stronger competitive constraint on BT.
While Ofcom has stated that the consolidation journey is at an early stage and that the timing and form of it is unknown, the regulator considers M&A a “foreseeable development” that it has reflected in its geographic market definition. It remains unclear, however, if and/or how Ofcom would account for a major announcement in the immediate term within its projections for competition over the review period given that the deadline for its final market analysis decision is fast approaching. Should such an announcement be made ahead of March 2026, Ofcom might be forced to reconsider its modelling and proposals, potentially delaying the release of its TAR statement that could lead it to roll over existing regulation (e.g. access remedies, charge controls) for a period of time. There is a precedent for this. In July 2017, the Competition Appeal Tribunal (CAT) annulled various aspects of Ofcom’s 2016 Business Connectivity Market Review (BCMR) decision, requiring the regulator to look again at its conclusions concerning market definition. To cover the period until Ofcom completed a new BCMR, it imposed temporary conditions designed to safeguard competition and protect the interests of consumers.
Also uncertain – and almost entirely untested – is the extent to which the CMA would be open to consolidation between altnets, especially those with a meaningful, expanding network and/or customer base. In December 2024, it conditionally approved the Three/Vodafone merger, although the nature of the deal and the parties involved provide for limited read across. Nevertheless, the CMA has looked to more closely align its approach to merger control with the Labour Government’s growth agenda (for example, through its “4Ps” framework), perhaps indicating a greater willingness than in the past to approve M&A where it can be convinced that a transaction would have a net positive effect, in particular through stimulating investment.
The CMA would emphasise though that it assesses the merits of a transaction on a case-by-case basis, investigating whether or not it would lead to a substantial lessening of competition (SLC). Inferences could be made from the recent CityFibre- and Virgin Media O2/nexfibre-led acquisitions, which essentially added hundreds of thousands of premises to their coverage outside of their previous footprints. That these deals did not give the CMA cause to review, even at Phase 1, might suggest that consolidation among altnets whose fibre networks do not overlap may not raise serious competition concerns. In light of its widespread cable network, whether such generosity would always extend to Virgin Media O2 would depend on the CMA’s perspective on the substitutability of cable and fibre technologies. In its final report in January 2016 that approved BT’s acquisition of EE, the CMA leveraged Ofcom’s 2014 definition of the broadband product market that included services provided over cable, copper or fibre. Equally, with this decision now almost a decade old, the CMA’s thinking may well have moved on.
History fails to offer much insight into how altnets might eventually come together
With the UK fibre market at a crossroads, it is worth considering whether there are lessons from history, both at home and elsewhere in Europe, that might offer a guide as to the direction of travel, and to the speed and destination of that journey. In the UK, government policy spawned a host of cable companies during the 1980s, with each issued a licence to deliver TV services in an individual franchise area. However, while scores of licences were granted, significant build costs, technical challenges and competition from satellite led to delays to actual network deployment and service provision. Many franchisees’ difficulties were also compounded by poor adoption rates. By 1992, there were around 30 firms holding cable franchises, many of whom were owned outright or in part by large cable operators from Canada or the US. By 2006, there were just two left (WightCable and NTL:Telewest, with the latter swiftly rebranded as Virgin Media). In cable, consolidation involved many ‘paper’ (i.e. equity-based) deals to amalgamate regional monopolies, with most transactions occurring in close proximity towards the end of the 1990s.
Looking abroad, Germany has been spoken about before in the same breath as the UK as countries playing catch up to Europe’s fibre leaders (e.g. France and Portugal). With the rollout phase seemingly still in full swing, consolidation appears to be lower down the industry agenda. Spain is a more mature fibre market and has been cited as a reference point for the kind of landscape that might emerge in the UK. Today, Spain’s broadband market is a mix of national, vertically integrated operators and open access platforms, as well as local players, some of whom also offer mobile and TV services as part of a converged offering. The country has gone through a period of rationalisation, driven in particular by Avatel, which is essentially the result of merging several local operators. These transactions have tended not to attract competition authority attention as the parties involved have typically served separate geographies, avoiding overlap in practice. Rumours of further M&A therefore continue to swirl that regional consolidators are poised to acquire their smaller competitors. Spain has also been described as representing a more efficient model than the UK in that the largest operators, including former incumbent Telefónica, actively wholesale from rivals in some areas rather than relying purely on self-supply. There is no indication, however, that this is an option BT is currently eager to pursue.
Whether these examples could provide a reliable roadmap for how the domestic story might pan out is somewhat questionable. Altnets are contending with similar supply- and demand-side challenges to those faced by cable franchises in the 1980s and 90s. That said, the number of altnets in the UK today far outweighs that of live cable networks over 30 years ago, and the combination of all of them into just two within the timeframe some would hope for is surely ambitious, not least because of complex integrations and regulatory scrutiny. The Spanish experience is still instructive, although it is important to bear in mind the role of national circumstances in shaping consolidation, including differences in starting points, wholesale agreements, regulatory regimes and consumer demand for fibre, which will mean that countries will inevitably forge their own path. For the UK’s distinct, maybe even unique, market structure, consolidation is increasingly imminent, although some altnets may find it easier than others to realise their ambitions.
In the second part of this series, we will outline a framework for analysing the potential competition concerns that could arise in future consolidation scenarios and for assessing the prospects of CMA approval.
