Why the UK's alternative broadband providers are under pressure

This collection of smaller, independent network builders is known as ‘alt-nets’, a group which finds themselves facing a host of threats to their future.

Having recently acted for G.Network on its distressed sale to Fitzwalter Capital, we have seen first-hand how enterprise valuations across the sector have been hit in recent months.

As widely reported, having raised hundreds of millions in debt and equity as part of its rapid growth plan, the business was ultimately sold to a distressed debt specialist in an accelerated process. Fitzwalter Capital has subsequently placed the business into administration.

By way of contrast, we had previously acted on the financial restructuring and sale of Trooli in 2023, where the purchase price was considerably higher and represented a full recovery for the senior secured lenders in that case. And while every business is different, the contrast between the outcomes of two similar processes in the alt-net space show how market sentiment has considerably shifted.

There are a number of reasons why.

Crowded and competitive market

Alt-nets have collectively built fibre networks passing approximately 22 million premises across the UK. However, with an average of almost two and a half potential fibre connections (FTTP) per household, multiple providers are often competing for the same customers on the same streets.

According to Ofcom data, only around a third of households have actually chosen to take up a FTTP connection where it is available. This slower uptake and intense competition has driven down prices and squeezed returns in an industry that already carries extremely high upfront costs.

As a result, established incumbents have cut average new customer pricing by around 7% year-on-year, forcing alt-nets to respond with even cheaper offers of their own.

Rising debts and costs

The alt-net sector is now carrying more than £9 billion in debt. This has been accumulated to fund the enormous cost of laying fibre optic cables, a process made significantly more expensive by rising interest rates and higher construction costs.

In many cases, the cost of funding the roll out of the network far outweighs the revenue generated by these firms.

With the global macro-economic environment suggesting higher interest rates and higher inflation may be here to stay, this presents a structural issue for the sector.

Customer attraction and retention

A central problem is that far fewer customers than expected have moved away from the established incumbents, Virgin Media O2 and BT's Openreach.

Openreach alone is now passing 1.1 million premises per quarter, with take-up exceeding 50% in older parts of its network. Alt-nets, by contrast, achieved only around 15% take-up by the end of 2024 - well below the roughly 40% that analysts consider necessary for sustainable profitability.

Those that have been successful focus relentlessly on the switch from being a construction and digital infrastructure business to being a sales and customer service business. This is not an easy transition to do well.

Casualties and consolidation

The cumulative effect of these pressures has led to insolvencies and forced consolidation. As well as G.Network, Gigaclear has undertaken a recent restructuring, while Truespeed and Freedom Fibre recently announced a merger – something we anticipate leading to further consolidation in the sector in 2026.

This is likely to be a pivotal year for the alt-net sector, as businesses have to make the jump towards profitability by focusing on customer take-up and retention, operational efficiencies and cost control.

For those that can achieve this successfully, there is a pathway to increased market share and profitability. However, it is likely that there are simply too many providers in the UK market for this to be the case for all.