CityFibre CEO: Altnets have scared away traditional UK fibre providers
While others say altnet consolidation is just a matter of time CityFibre chief executive Greg Mesch said this week that alternative network providers (altnets) have led the push for fibre in the UK. Mesch made the comments at Connected Britain in London, where he also criticised traditional industry providers Openreach and Virgin Media O2. Founded in 2011, CityFibre is a fibre optic provider. The company’s network covers 3.9 million locations, according to Mesch, slightly behind Virgin Media O2’s 5.3 million. Both are behind Openreach, […]
While others say altnet consolidation is just a matter of time
CityFibre chief executive Greg Mesch said this week that alternative network providers (altnets) have led the push for fibre in the UK.
Mesch made the comments at Connected Britain in London, where he also criticised traditional industry providers Openreach and Virgin Media O2. Founded in 2011, CityFibre is a fibre optic provider. The company’s network covers 3.9 million locations, according to Mesch, slightly behind Virgin Media O2’s 5.3 million. Both are behind Openreach, a subsidiary of BT Group, which has reached around 14 million premises.
\”The real challenge is us. “Altnets are the real challenge, they are what drives this industry,” Mesch said, before criticizing the two companies.
“It’s not regulation that has driven Openreach to invest like crazy, it’s fear. “They were terribly afraid of CityFibre jumping in quickly, the same goes for Virgin. They’re [Virgin Media O2] investing because they’re afraid we’re going to develop our network their way and offer a better service.”
He said the two companies had been “lazy” and called them a “cosy cartel”.
“The spark of competition has instilled fear in both incumbents because, by definition, we were a lazy duopoly, and that fear has now triggered a massive amount of investment in fibre,” he said. “What the government needs to do now is turn that spark into a sustained flame and keep competition at the forefront, because what we have delivered is for consumers. Consumers now have access to gigabit lines for £30, after five years they cost more than £100.
Last month CityFibre signed a long-term partnership with Sky, one of the UK’s largest broadband providers. The agreement will make Sky Fornindo broadband services on the entire Cityfibre fiber network.
This led Mesch to say that Cityfibre serves all the main internet service providers in the United Kingdom, except BT and Virgin Media O2. Consolidation is inevitable
There was a lively discussion at the event about consolidation within the alternative networking space.
Mesch said CityFibre was built on consolidation. The company acquired Lit Fiber in May, a deal that added 300,000 installations to its network.
CityFibre has also previously acquired other alternative networks, most notably TalkTalk’s FibreNation network for £206 million ($261 million) in 2020. That particular deal allowed CityFibre to increase its deployment target from five million installations to its current target of eight million installations.
One of its rivals, Virgin Media O2, has been keen to drive consolidation in this market, primarily in an effort to build its fibre presence to compete with Openreach. According to Lutz Schüler, CEO of Virgin Media O2, the market is too saturated.
“There are too many alternative networks on the market. “The business models don’t work. Many have already run out of money and you can see that construction has slowed down,” says Schüler. Let’s compare the market to a game of musical chairs: the music keeps playing, but once it stops, there’s not enough room for everyone to stay.
Last year, Virgin Media O2 was linked with a possible acquisition of CityFibre and, through
Nexfibre, an independent fibre joint venture between Liberty Global, Telefónica and Infravia, has been looking to acquire alternative networks as part of its downsizing plans. Nexfibre has significantly completed the acquisition of Altnet Upp of the United Kingdom last year and plans to invest over 350 million ($ 440 million) in Eastern England by 2026.
“Consolidation is required and the current market structure is not healthy,” said Rajiv Datta, executive director of Nexfibre. “I think, frankly, everyone is a little surprised that it’s taking this long for a consolidation process to happen.
“I think it’s partly a process of financial investors and a lot of alternative networks reconciling their expectations of value with the realities they see in executing their business plan.”
Datta agrees that fiber expansion has slowed, and notes that, over time, alternative networks will need to invest more in capital expenditures to increase penetration. “I think there will come times when we will see an acceleration of activity around consolidation,” he added.
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