"Matthew Howett, chief executive of Assembly Research, says Kirkby has impressed investors by seeing through the cuts and focusing on BT’s core broadband and connectivity business. “It’s a return to basics and making sure the core parts work well and are profitable,” he adds. “I wouldn’t be surprised if we saw disposals of non-core assets.”
Howett says Kirkby, who was previously chief executive at Telia, the Swedish telecoms company, and has been on BT’s board since 2019, impressed with the speed at which she got to work fixing long-term issues and “bringing everyone on board for the journey”. “There is a lot of staff, and a lot of them are engineers working out of vans around the country, not people in offices in London,” Howett says. “She is out there visiting everyone everywhere.”
BT has resumed the transition after forming a new telecare action board alongside local authorities and healthcare providers. However, there is still uncertainty over how many vulnerable customers will be affected by the switchover.
Matthew Howett, founder and chief executive of Assembly Research, said: “Fibre does present resilience challenges itself, particularly in the context of power outages and device compatibility.”
But he added: “The more reliable, resilient and future-proof alternative of fibre and IP communications will ultimately mean fewer faults and outages over the longer term.”
CK Hutchison’s merger of Three Italia with Wind Telecomunicazioni was approved only after the companies agreed to divest assets. More recently, regulators told Orange and MasMovil they had to grant spectrum and roaming access to rival Digi as part of their Spanish merger.
Howett says these remedies have “only compounded the problem” by allowing new entrants into the market just as the existing players are trying to consolidate.
“Where four to three has been allowed to happen, the remedies that you put in place have often just recreated the problem you’re trying to solve,” he says.
Matthew Howett, founder and chief executive of Assembly Research, argues that one of the key purposes of alt-nets has been to push Openreach to build its own network more quickly.
“That dynamic has played out already, it’s happened… so I think once they’ve lit that firework the vast majority of Project Gigabit will happen,” he says.
Matthew Howett, founder and chief executive of telecoms research group Assembly said this “could well be the first domino to fall in terms of an altnet being bought by one of the big players.”
“The UK broadband market is set to enter an era of scaled connectivity challengers, after first a period of dominance from the incumbent followed by a proliferation of altnets,” he added.
While the circumstances behind the sale of Upp are relatively unique, observers believe that many of the more than 100 so-called “alt nets” – mostly small broadband providers rolling out services across the country – will be snapped up by the biggest telecoms players as market conditions get tougher.
“Alt nets are a key piece of the connectivity jigsaw, but consolidation has been inevitable as new sources of funding dry up, focus on take-up intensifies and investors increasingly demand returns,” said Matthew Howett, the founder and chief executive at Assembly Research.
“Today’s announcement could well be the first domino to fall in terms of an alt net being bought by one of the big players.”
The deal is one of the first big signs of consolidation among “altnet” broadband providers by the large infrastructure groups that many analysts have been predicting.
Matthew Howett, analyst at telecoms research group Assembly, said: “Altnets are a key piece of the connectivity jigsaw, but consolidation has been inevitable as new sources of funding dry up, focus on take-up intensifies and investors increasingly demand returns.”
According to a study by Assembly Research, a research company, commissioned by Virgin Media O2, average monthly household spending on telecoms services has fallen by almost one-fifth since 2017.
The report also found that the telecoms industry was investing up to £2.5bn a year in mobile networks, and about £3.8bn into fixed broadband. It estimated that combined capital expenditure accounted for nearly 70 per cent of total investment made by some of the largest industry players.
Mobile industry executives highlight the decision of Boris Johnson’s government in 2020 to strip Huawei out of Britain’s nascent 5G networks because of national security concerns as a reason for the slow rollout.
“That absolutely put the brakes on deployment for the operators,” Matthew Howett, chief executive of Assembly Research, said.
A report last month from analysts at Assembly Research showed how the UK was cheaper than most other countries for broadband and mobile.
Mobile data usage per UK consumer trebled in the five years to 2021 and is more than the average in the US, France, Spain, Germany, Italy and Japan. At the same time, the monthly price of a five- gigabit data allowance in the UK has fallen 36 per cent since 2017 to £7.30, according to Assembly. That is only more expensive than Spain of the countries included in the report. The same is true for broadband. The average monthly price for the UK’s most popular broadband speeds (30-100 megabits per second) has fallen by more than 20 per cent to below £20. Of the countries on the list, only Germany is cheaper.
TMT analyst at Assembly Research James Robinson told City A.M. that whilst the UK have harboured world-leading ambitions for regulating Big Tech, this is yet to materialise.
“With the DMU so far only operating in shadow form, we are playing catch up to the EU, which has seen the DMA and DSA both enter into force,” he said.
James Robinson, senior analyst at Assembly, a research firm, said a deal would reduce the number of mobile operators serving so-called mobile virtual network operators, which include the likes of Tesco, “potentially leaving them in a weaker bargaining position”.
He added: “The CMA might consider remedies to maintain retail competition, including requiring the merged firm to reserve a portion of network capacity for virtual players.”
James Robinson, an industry expert at Assembly, said: “While the parties might view consolidation as a way to improve returns and unlock shareholder value, we expect the CMA would be eager to protect against the risk of consumer price rises - particularly in light of the current cost of living crisis.”
