Analysis of Q4 2023 UK ISP metrics
In summary
Total Q4 2023 FTTH/P/B, FTTC, cable, FWA/satellite and DSL wholesale and retail connections remained relatively static during the quarter and stood at an estimated 28.866m from 28.833m q-o-q and down from 28.960m y-o-y.
The fixed broadband retail market slowdown resulted in a 0.11% increase q-o-q with ~33k net broadband subscriber additions (with ~4k in Q3 2023) with y-o-y uptake falling by -0.33%, a slight improvement compared to -0.91% for the previous quarter’s reduction in annual take-up.
Overall we estimate that at the close of Q4, FTTP coverage was just over 18.7m premises (58.4%), up from 17.4m in Q3 2023; across the UK, 21% of premises still lacked gigabit access, down from 23% three months earlier.
We estimate that BT’s Consumer division (which includes business) saw an overall loss of ~16k subscribers; compared to Q3 this represented around a 0.15% decrease in the retail segment but saw strong growth in its FTTP base adding 220k FTTP connections to reach 2.3m up 46% y-o-y.
BT Group’s revenue growth remained positive at 5% from 3% helped by price increases; Openreach maintained positive at 7% growth despite the supplier reporting around 100k net losses across its FTTC and copper connections, with FTTP connections picking up the slack.
Openreach’s FTTP connections increased by 432k q-o-q and reached 4.303m up from 3.871m.
Openreach delivered another record FTTP network rollout of 950k premises passed in the quarter at an average rate of around 73k premises per week with a footprint of 12.802m and passed the halfway point (51%) of their 25m premises passed ambition.
At the close of Q4, we estimate that nearly 51% of lines live on the Openreach FTTx network belong to non-BT service providers.
Of the four other major ISPs, Vodafone had the strongest quarter with ~39k broadband net additions, followed by Sky with ~29k, while Virgin Media O2’s (VMO2) performance was less than impressive with ~10k additions. TalkTalk continued to have a turbulent year with ~77k net losses as it grapples with its mountain of debt, however, it did confirm in February that it will be taking on Shell Energy Broadband’s ~480k subscriber base which will bolster its financial performance in 2024.
Independent (or AltNet) providers[1] also struggled with economic headwinds as they have slowed down their FTTP network rollouts to focus on subscriber take-up, but had a strong final quarter with around ~80k additions up from ~41k net adds in the previous quarter. During the quarter, AltNets consumer broadband base reached an overall estimated 1.937m up from 1.858m in Q3 2023.
VMO2’s broadband customer base increased to 5.717m but its overall in-footprint penetration rate decreased to 33.6% as Openreach reached parity with its FTTP penetration rate.
VMO2’s FTTP fixed network deployment (primarily on behalf of nexfibre) passed 800k premises this year; an additional 299k were added in Q4 2023 up from 251k.
CityFibre (CF) has been awarded nine Project Gigabit procurements (70% of contracts) to date worth £782m in subsidies covering 460k premises.
CityFibre added 1m Ready for Service (RFS) homes in 2023, taking total RFS premises to over 3.2m and delivering £100m in revenue in the year.
Comcast, Sky UK’s parent company, reported 111k net losses in its international connectivity markets; however, we estimate Sky UK to have added around 29k broadband net adds to close the quarter with 5.748m broadband subscribers. Its pay-TV segment is struggling with the knock-on effects of the cost of living crisis and with an estimated net loss of 30k TV subscribers in the quarter.
During Q4 Vodafone’s fixed broadband consumer base grew by 3% (up from 2.1% in Q3) and saw 39k net additions, up from 27k in the previous quarter, bringing its customer base to 1.331m.
TalkTalk Group provided an update on its demerger process announced in October 2023, with the separation of its network wholesale platform business (“PlatformX Communications” or “PXC”) and its residential broadband customer business (“TalkTalk Consumer”), which will continue to trade under the TalkTalk brand.
The two businesses will trade independently as of 1 March, with a long-term exclusive wholesale agreement in place by which TalkTalk Consumer will benefit from access to the PXC network. TalkTalk Business Direct (its Business division) was sold off for £95m to its shareholders in early October.
Retail (including consumer and business) market overview
Retail fixed line broadband segment continues its decline
Q4 2023 saw a continued slow down in total consumer and business fixed connections to reach 28.866m; DSL connections dropped by 10% totalling 2.142m, FTTC reduced by 2% reaching a total of 14.677m, with FTTB/H/P lines picking up the slack with a 10% increase in uptake totalling 5.877m (Figure 1).
BT’s Consumer division continued to show a strong quarterly financial performance despite the challenging market conditions and revenue growth remained positive at ~5% and its EBITDA increased to 4%. Its revenue increase was supported by its equipment sales and April 2023 broadband price increases still supporting its ARPU which increased 1ppt during the quarter to reach 5%.
BT Group only publishes detailed metrics in quarters 1 and 3 and we estimate BT’s Consumer segment to have an overall loss of ~16k subscribers during the quarter but re-contracted or upgraded around 220k FTTP connections to see its full fibre base reach 2.3m up 46% y-o-y.
The major ISPs saw a modest recovery during the quarter, with Vodafone seeing the largest increase with ~39k broadband net additions (Table 1).
AltNets continued to streamline operations, announce restructures, job losses and slow down their FTTP network deployments to concentrate on uptake in their footprints, but saw a gain of ~80k subscribers during the quarter.
Despite AltNet consolidations and third-party financial investments easing, the major independent players such as CityFibre, Hyperoptic, Community Fibre and Gigaclear are bolstering the market and we estimate the total AltNet penetration rate to be around 16% for their combined estimated footprint of c.11.5m premises (taking into account AltNet overbuild).
The next year will see a changing landscape in the AltNet sector as mid to larger players accelerate their strategic mergers and acquisitions e.g. CityFibre announced it had acquired LitFibre on 14 March.
The top 5 ISPs along with AltNets total subscriber numbers have moderately fluctuated over the past year with gains and losses remaining relatively stable, especially after the unparalleled growth experienced after the Covid-19 pandemic (Figure 2).
BT continued to dominate the sector with an estimated 10.5m subscribers (including EE and Plusnet). On 13 October, BT Group announced the ‘New EE’ as its consumer flagship brand with greater converged offerings and a focus on four customer needs: Game, Home, Learn, and Work.
BT’s half-yearly reporting makes it difficult to make any conclusions on how successful the launch of the New EE service is in terms of subscribers, especially since BT is still selling its own brand fixed services due to its strong market presence. It is beginning to migrate its consumer broadband base over to EE and will be banking on upselling the more ARPU-friendly converged packages. EE’s entry-level pricing has also now been adjusted to meet BT’s more expensive pricing scale, which should see BT having a strong end to the financial year in Q1 23.
VMO2 had a very modest 9,500 net broadband additions bringing its base to 5.718m. The operator has stopped reporting its pay-TV subscribers, indicating that the segment is largely in decline or will begin to be phased out as an OTT service.
VMO2 faced headwinds in 2023 as consumer fixed revenue experienced a decline of 2.3%, falling to £3.3bn, but banks on future revenue generator NetCo, its new national scale fixed network wholesale competitor that will rival BT's Openreach.
Sky also saw moderate growth with ~29k net additions bringing its subscriber base to 5.749m. Its pay-TV segment suffered with an estimated ~30k losses.
Vodafone reported 39k broadband additions up from the previous quarter’s 27k adds; it is still successfully leveraging its vast combined FTTP footprint due to its reselling agreements with CityFibre and Openreach, whose combined ready for service footprint covered around 16.2m premises at the close of the quarter.
TalkTalk continue to grapple with declines in revenue and subscribers and announced its planned demerger into three separate entities (see summary), along with the sale of its Business Direct - the SME and enterprise-focused connectivity segment - to its shareholders for £95m on 3 October. Overall, its broadband customer base was down by 6ppts and we estimated its subscriber base to have reached 3.1m at the close of Q4.
Looking at retail market shares, BT Group lost around -0.17% and dropped to 36%, which will likely start to even out over the next several quarters as copper legacy lines continue to decline with FTTP, newly converged mobile and refreshed TV services being heavily pushed through its ‘New EE’ brand.
VMO2’s share will be worth watching as its Project Mustang (upgrading of its entire legacy HFC network to FTTP) and additional full fibre deployments on behalf of nexfibre open up further take-up opportunities, if it can get its pricing competitive enough as overbuild and larger operator annual price increases on the horizon consumers will become more savvy in terms of saving on their monthly outgoings.
Figure 4 provides an overview of the fixed line broadband operator’s market shares since Q4 2021. Since Q2 2022, Point Topic has changed its retail market statistical data reporting to include a smaller cohort of rural, urban, regional and national AltNet providers and stopped tracking providers whose FTTP footprints or take-up did not meet our threshold criteria. Therefore, there will be a dip in quarterly market statistics for AltNets as Point Topic shifts its focus onto those providers deploying gigabit-capable networks at scale.
Retail FTTP trends
Billions in cap/op expenditures on full fibre network deployments in the past few years have seen coverage increase at breakneck speeds in parts of the UK. Larger proportions of the Local Authorities (LAs) are seeing an increase in multiple FTTP operator coverage – 117 LAs had three overlapping independent fibre providers, compared to 103 in Q3 2023.
Nationwide more than 2m premises could choose between three independent fibre ISPs. This figure went up by 147K premises, compared to +180K in Q3 2023; 21% of UK premises did not have access to gigabit-capable broadband (either a DOCSIS 3.1 network or an FTTP network).
Retail and business FTTP connections reached an estimated 5.877m at the end of Q4 2023. Figure 5 below represents the growth in full fibre connections (for the major ISPs and Altnets) over the past year.
Worth noting is Virgin Media O2 has been excluded from the representation below as its subscribers are predominately serviced by its DOCSIS 3.1 cable network.
Retail new subscriber entry level fixed line pricing, superfast vs. ultrafast
Q3 to Q4 2023 entry level superfast (>30 Mbps) pricing increased by 1.3% with the average price coming in around £26.50 per month (Figure 6).
BT (and now EE) continued to be above the national average which, taken with the inflationary price rises (CPI 4% + 3.9%) BT will have to be savvy in their efforts to not only retain current subscribers, but trying to manoeuvre consumers onto the more costly full fibre speed tiers to shore up their ARPUs in the coming months.
BT also announced on 16 January that, starting in early summer, it will introduce a pricing model consistent with Ofcom’s approach, moving away from % figures and CPI, and offering instead, a clear and simple view of any changes in “pounds and pence”.
ISPs will all be in the same predicament as they will all be operating in a dwindling market, with most consumers continuing to be more budget-conscious and opting to stay on a speed tier that already suits their needs without seeing the necessity to upgrade.
Conversely, in terms of entry level ultrafast (full fibre, with speeds greater than 100 Mbps) pricing tariffs have decreased slightly to reach an average of £28.89 per month from £30.09 during Q3 (Figure 7).
In addition to the major suppliers, we tracked 5 AltNet providers ranging from the larger national players (Hyperoptic, Gigaclear, Fibrus) to London-focused urban supplier Community Fibre, and regional ISP brsk. Gigaclear and Fibrus had the lowest entry level 150 Mbps full fibre packages at £15.00 and £19.99 per month respectively.
Sky and BT were the most costly for its entry level ultrafast product (£36.00 and £35.99), followed by Hyperoptic (£35.00), VMO2 (£34.00), and brsk (£33.00).
Regional rural provider Gigaclear by far led the group on affordability with their entry level symmetrical 200 Mbps speed tier coming in at £15 per month followed by Fibrus’ 150/30 Mbps £19.99 per month package.
Infrastructure and wholesale market overview
Wholesale broadband connections slowing in a saturated market
Total Q4 2023 FTTH/P/B, FTTC, cable, FWA/satellite and DSL connections decreased during the quarter and stood at an estimated 28.866m up slightly from 28.833m q-o-q but down from 29.036m y-o-y
FTTP connections are picking up the slack in terms of copper-based legacy product losses, to reach a total of 5.801m at the close of the quarter up from 5.264m in Q3 and 4.339m y-o-y.
Openreach’s FTTP connections increased by 432k q-o-q and reached 4.303m up from 3.871m, delivered another record FTTP network rollout of 950k premises passed in the quarter at an average rate of around 73k premises per week with a footprint of 12.802m (Figure 8).
Openreach’s overall broadband base was down 114k since Q3 2023, largely in its copper base, due to a weaker broadband market, including slower new home build, dual line ceases and competitor losses, that were broadly flat.
Openreach continued to target its broadband base to decline by around 400k in the financial year, a weaker-than-expected broadband market means there is a risk that it will exceed this level. Its broadband base decline has occurred where it does not have an FTTP presence.
AltNets had a stable quarter with around 66k net broadband additions up from 56k in Q3. For a more detailed overview of the Q3 – Q4 2023 performance by suppliers see Table 2 below.
VMO2 pivots in challenging times
VMO2 had a weak quarter with ~10k broadband net additions up from ~41k additions in the previous quarter.
It had expanded its full fibre network by 299k premises (up from 251k in the previous) primarily from rollout on behalf of nexfibre, bringing the total to just over 800k premises passed during the year (Figure 9).
This ongoing expansion activity takes Virgin Media O2’s total gigabit-capable footprint to 17m homes serviceable as at the end of Q4, alongside a growing fibre footprint as the company’s fibre upgrade activity remains on track for completion in 2028.
Virgin faced headwinds in 2023 as consumer fixed revenue experienced a decline of 2.3%, falling to £3.3bn. The company attributed this setback to consumers tightening their purse strings due to increased cost-of-living. In parallel, VMO2’s B2B fixed revenue also experienced a similar downturn, dropping by 2.4% to reach £554m. The alignment between consumer and business revenue trends underscores the broader economic challenges faced by the company.
Future financial recovery may come through the creation of its fully consolidated subsidiary of VMO2, NetCo, which will "have a neutral impact on the company’s leverage and credit structure". It will be comprised of the operator’s cable and fibre network assets covering 17m UK premises, with all upgraded to full fibre in the coming years.
[1] Point Topic tracks 106 AltNet providers ranging from micro / local ISPs to larger providers with national coverage.