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  • Writer's pictureVeronica Speiser

UK Q4 2022 Retail ISP and Network Operators Market Analysis

Summary of Key Findings

The past two quarters of the year marked a definite slowdown within the fixed line sector as Covid pandemic gains firmly abated along with the cost of living crisis seeing a shift from fixed services to mobile broadband only. Despite the sector’s healthier uptake in numbers across the board, with around 85k net broadband additions at the close of Q4 2022, compared to the previous quarter’s 13k, the market remains challenging with little signs of significant turnarounds on the horizon.

We estimate BT’s consumer division to have lost around 79k connections as it struggles to attract new subscribers. Its churn rate remained around 1.1% meaning it is likely offering out-of-contract subscribers similarly priced tariffs with an eye on retention. Virgin, Sky, TalkTalk and Vodafone all reported modest gains to close off the year with this trend slowing in the upcoming quarters.

FTTP network rollout has steadily continued throughout the quarter with Openreach covering 9.572 million premises and Virgin Media O2’s (VMO2’s) Project Lightning drawing to a close with around 3.2 million premises passed. Wholesale broadband lines increased by around 100k totalling 29.14 million. A wholesale market shake-up looms as the new fibre joint venture, Nexfibre, between Telefónica, Liberty Global and InfraVia Capital is launched with 24k Project Lightning premises being transferred to the network.

Key Points:

  • Total Q4 2022 FTTH/P/B, FTTC, cable, FWA/satellite and DSL wholesale connections stood at an estimated 29.14 million, up from 28.51 million y-o-y; with retail consumer and business connections reaching an estimated 29.11 million during Q4 2022, up from 28.77 million at the close of Q4 2021.

  • Household Internet penetration reached 89.65% with the majority of fixed broadband connections using predominately FTTC, DOCSIS 3.1 or FTTH/P/B technologies.

  • BT’s fixed broadband consumer division saw an estimated 79k losses in the quarter; for the third consecutive quarter Openreach reported a loss (-10k) due to the market slowdown.

  • Openreach’s FTTP penetration rate continued to slowly rise at 28.5% and is steadily closing the gap on VMO2 with the latter’s take-up rate falling to around 35%.

  • Openreach reported that in locations where it built out its FTTP network 24 months ago, almost 50% of the Openreach broadband base are now on FTTP.

  • At the close of Q3 we estimate that nearly 55% of lines live on the Openreach FTTx network belong to non-BT service providers.

  • VMO2’s fixed segment reported broadband net adds reaching just under 23k up from a 19k bringing its broadband customer base to 5.653 million.

  • Sky UK remains the dominant player in its European operations and its UK operations are bolstered by pay-TV subs and closed the quarter with around 6.215 million broadband subscribers.

  • CityFibre’s (CF’s) nationwide full fibre network passed over 2.5 million premises at the close of the year, with more than 2.2 million ‘ready for service’ to ISPs.

  • Out of the AltNet ISPs metrics we tracked there were an estimated 45k broadband net additions compared to 32k in the previous quarter.

  • Overall AltNet operators FTTx (pre-dominantly FTTH/P/B) ISPs subscriber numbers are slowly on the rise; we estimate the total number to be around 2.81 million at the close of Q4 2022.

BT Group’s consumer ultrafast segment’s share increased to 14.7% at the close of the quarter up from 12.9% in the previous and 8.6% y-o-y. FTTP connections increased by 155k to reach 1.559 million which marked its best quarter for FTTP additions/upgrades.

Looking at its consumer segment’s penetration rate and Openreach’s full fibre footprint of 9.572 million premises we estimate its uptake rate to be around 34% where the technology is available. However, given the monthly ARPU of around £37.40 subscribers are not opting for the faster gigabit-capable speed packages of >300 Mbps but more likely the 50 – 100 Mbps option. With most subscribers being used to similar legacy copper product speeds, consumers are unlikely to subscribe to a faster premium broadband speed package as their bandwidth needs are being met, albeit just more reliably over full fibre. This consumer ‘make-do’ or ‘what isn’t broke, don’t fix it’ mentality is not a BT specific problem but one that is prevalent in the market as a whole.

More detailed analysis on FTTP uptake and its place within the current consumer marketplace can be found in our December 2022 report, The UK’s TV, Streaming and Broadband Market: cost of living crisis challenging bundled synergies and the February 2023 report, FTTP in the UK. Is it worth it?

Meanwhile, Openreach did have a better performing quarter considering the general market slowdown with a reported 10k net losses in its customer base bringing its total broadband connections to 21.525 million. It continued its upward trend for FTTP net adds (324k) during the quarter and its FTTP penetration rate increased to 28.5%, up just 1.1%, its slowest penetration growth since Q1 2021 (see Figure 1 below).

Figure 1:  Openreach ultrafast coverage, connections and penetration rates Q4 2020 – Q4 2022, Source: BT Group Company Reports
Figure 1: Openreach ultrafast coverage, connections and penetration rates Q4 2020 – Q4 2022, Source: BT Group Company Reports

Again, Openreach reported a record quarter with an FTTP build of 810k premises passed at an average build rate of 62k per week which marked 38% completion of its 25 million premises build plan. On top of its 9.572 million (3 million of which are rural) FTTP network footprint a further 6 million have their initial build underway.

At the close of Q4 2022, we estimate wholesale connections to have reached 29.14 million. Similar to the retail sector, growth has begun to plateau and as reported above Openreach for the third consecutive quarter reported a loss of connections. Increase in net broadband connections grew by a 0.4% q-o-q and 2.2% y-o-y. Despite the increase in FTTP network coverage by major and independent suppliers this small level of growth is indicative that the market is reaching saturation point along with AltNet suppliers not gaining as much traction as expected within their footprints.

As expected, DSL lines are on the wane and dipped to 2.83 million during the quarter down from 2.95 million during the previous quarter. FTTC connections decreased to 15.97 million compared to 16.19 million in Q3 and 16.39 million the previous year. FTTP ultrafast (100 Mbps+) lines are progressing and have risen to around 4.20 million up from 3.79 million in Q3 and 2.40 million at the close of Q4 2021 (Figure 2 below).

Figure 2: Wholesale connections by technology Q3 2021 – Q3 2022, Source:  Company reports where available/Point Topic estimates
Figure 2: Wholesale connections by technology Q3 2021 – Q3 2022, Source: Company reports where available/Point Topic estimates

Virgin Media O2 published its Q4 results late in February 2023 with Telefónica, Liberty Global and InfraVia Capital Partners confirming the launch of the new £4.5bn fibre joint venture (JV) Nexfibre. The venture aims to extend VMO2’s footprint to approximately 80% per cent of the UK or a further 7 million premises not served by its existing network by 2027.

Virgin’s Project Lightning full fibre network expansion increased during the quarter as a result of the JV announcement and is now nearing its completion. Project Lightning’s rollout passed 188k premises in Q4 up from 115k in the previous quarter, bringing the total build to 3.2 million (see Figure 3 below).

Figure 3:  Project Lightning Quarterly Build Progress Q4 2018 – Q4 2022  Source: Liberty Global/Virgin Media O2
Figure 3: Project Lightning Quarterly Build Progress Q4 2018 – Q4 2022 Source: Liberty Global/Virgin Media O2

Full details of the quarterly analysis along with the metrics spreadsheet can be accessed with a UK Plus subscription.


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