Stock market today: Nasdaq closes above 23,000 for first time as tech rebounds
Investing.com -- The UK telecoms market is experiencing intensifying competition from alternative network providers (altnets) and mobile virtual network operators (MVNOs), according to a comprehensive UBS field trip report.
The report identifies four key trends shaping the sector: broadband competition is intensifying with operators cutting prices in September; altnet consolidation appears inevitable but timing remains uncertain; mobile market dynamics remain unchanged post-VodafoneThree merger; and mobile consolidation will impact network infrastructure costs.
In the broadband market, altnets have built a substantial footprint covering 17.5 million homes with pricing 20-30% cheaper than incumbent BT Openreach. Major providers like Sky are increasingly shifting volumes to altnet networks, with Sky’s partnership with CityFibre potentially reducing BT’s free cash flow by £150-300 million annually.
BT Openreach line losses are expected to accelerate to -225,000 in Q2, -300,000 in Q3 and -300,000 in Q4 as altnets continue gaining market share. UBS notes that altnets can sustain lower pricing if they achieve penetration rates above 35% on their footprint.
The report suggests two potential paths for altnet consolidation: either altnets consolidating among themselves, potentially keeping prices lower for longer, or VMO2-led consolidation through its nexfibre joint venture, which could help the market recover.
TalkTalk’s owners have reportedly started an M&A process, with VMO2 considered a potential buyer. Such a deal could yield significant synergies for VMO2 but would be "very negative" for BT/Openreach, potentially resulting in a £360 million loss of high-margin revenues.
In mobile, the VodafoneThree merger hasn’t changed market dynamics, with MVNOs continuing to gain share. New fintech MVNOs like Revolut, Monzo and Klarna are considering entering the market, potentially increasing competition further.
For BT/EE, the end of the MBNL network joint venture with Three in 2031 could result in £20-40 million in additional annual lease costs, with further pressure to densify its network to compete with VodafoneThree.
The Telecoms Access Review (TAR) proposes to maintain the existing regulatory framework for the next five years, with no significant changes expected.