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Hints of Large UK Broadband Merger Between Netomnia and Brsk

Monday, Apr 15th, 2024 (10:16 am) - Score 9,240
Netomnia-Helmet

Industry sources have indicated to ISPreview that two prominent alternative network operators, Netomnia (YouFibre) and Brsk, both of which have deployed a significant amount of Fibre-to-the-Premises (FTTP) broadband infrastructure to cover UK homes and businesses, could be set to merge their networks in the near future.

Netomnia is currently the largest of the two operators, having already covered 850,000 premises and raising £795.5m of investment in the space of just three years (primarily via Advencap, DigitalBridge and Soho Square). The operator, which sells its packages to consumers via sibling ISP YouFibre (they have 80,000 customers), also holds a tentative ambition to reach up to 2 million premises by the end of 2025 (1.5m is already planned).

NOTE: Both of the gigabit fibre operators share a connected investor in the shape of Advencap.

By comparison, Brsk – fuelled by an investment of at least £259m (mostly via Advencap and the Ares Management Corp) – has so far covered 450,000 homes (441,000 Ready for Service) in England and sells packages to consumers under the same brand (they have 28,000 customers). But they also aim to pass 1 million homes by 2026.

According to industry sources, Brsk and Netomnia are currently alleged to be engaged in discussions that could result in the pair agreeing to merge their networks “in the next 4-6 weeks.” Such a deal would not be all that surprising, particularly given that both operators are partly being backed by the same investor, Advencap.

In addition, both operators have managed to avoid overbuilding each other, and appear to share a similarly capital-efficient approach to infrastructure build, which harnesses as much of Openreach’s existing cable ducts and poles (PIA) to run new fibre as possible (Netomnia spends an average of £250 per premises passed). This may be a key point, much as Netomnia recently told ISPreview in our interview (here).

Jeremy Chelot, CEO of Netomnia and YouFibre, said:

“Where altnets differ significantly is the capital they spend to get premises RFS and to acquire customers. By the end of February 2024, Netomnia and YouFibre have only consumed £170m of debt. That works out to £200 of debt for each premises RFS – the larger altnets in the UK have consumed up to five times more debt than us for each premises they make RFS. And it’s the same story with equity.

Because of our key difference (capital efficiency), it makes consolidation in the UK very hard. We are so capital efficient that almost every deal will cost us more than organic growth and we have an addressable market in front of us of several millions. Therefore, while we would love to be a consolidator, it makes it difficult. We have not built the business to be consolidated. We focus on delivering for our customers and becoming the third network in the United Kingdom and that’s what drives me!”

At this point, any agreement between the two would naturally create a much larger player in the AltNet space (c.1.5 million premises passed and plans for c.3 million) and one that could much more readily challenge the leading players in this space, such as CityFibre, CommunityFibre and Hyperoptic. But equally, it could also turn them into a bigger target for CityFibre’s own M&A ambitions, further down the road.

Finally, both operators adopt consumer pricing that is roughly within the same ballpark, although YouFibre’s packages do go a lot faster (up to 7-8Gbps). But suffice to say that this would make it easier to align their respective customer offerings, hopefully without upsetting the base too much.

We queried all of this with Netomnia and Brsk today, although much as you’d expect, both returned a “no comment” response (par for the course when asking about M&A or anything commercially sensitive). Time will tell.

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Mark-Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
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Comments
21 Responses
  1. Avatar photo John says:

    “industry sources” = a bad leak from an employee or a purposeful leak to generate hype?

    In anyway if this is true then later down the road they could be the ones acquiring Community Fibre since also zero overlap to become the undisputed #1 altnet and doing so in a capital efficient way rather than City Fibres insane debt madness. Youfibre could still sell over City Fibre to the become a super national player

    1. Avatar photo Matt says:

      Can’t see it. Community Fibre is so expensive in comparison per premises passed.

      looking here:
      https://www.ispreview.co.uk/index.php/2023/07/communityfibre-bring-fttp-broadband-to-1million-london-homes.html

      1.6bn for 720,000 prem passed is almost £2200 per prem passed. It’d be cheaper to ignore them and overbuild or wait for them to go bust and pick them up for pennies on the pound.

      I really hope Netomnia continue to grow though. I had high hopes for cityfibre but any large player that can get backing would be worth it.

    2. Mark-Jackson Mark Jackson says:

      Careful, you’re not looking at actual build costs there, Matt, and are taking the investment total as full spend (it isn’t, often the totals are commitments that get drawn down over time). I VERY much doubt CF are spending even remotely close to £2.2k per premises passed on their largely urban build.

    3. Avatar photo John says:

      CFs footprint is now above 1.4m, not just 700k, so your number is slashed out of the bat by half. There is no bigger urban area than London so even 1k per premise makes no sense.

    4. Avatar photo Matt says:

      Fair point Mark 🙂

      For some reason I’d just assumed they’d spent what they had available. Wish their companies house statements were more up to date so you could put a rough cost of expansion RFS and spend for that FY…!

    5. Avatar photo Jonny says:

      Community Fibre is quite different to Netomnia – a lot of MDU, active cabinets, a competitive market and a very high cost area to operate in. I’m not convinced it would be a natural fit for acquisition.

    6. Avatar photo John says:

      Disagree with the notion that is more expensive, it is vastly easier to send in a salesman to cover 100 doors in the same building than it is to cover 100 doors in the suburbs. If anything it is the other way around. Ballot harvesting in the US is a thing because of this factor

  2. Avatar photo XGS says:

    Now this comments section has potential. The anonymous crew moaning about the CEO possibly negotiating M&A rather than personally digging ducts to their homes are late, though.

    1. Avatar photo anonymous says:

      No, we just given up on Netomnia completely and going with BT FTTP instead when it gets here this year. From what I’ve seen nobody is taking YouFibre up here anyway as nobody knows about it (other than me and telling neighbours originally).

      Shame, as I like Netomnia compared to other companies so far and still wish them well. Perhaps when BT are done they will come and do my road, although it wasn’t exactly difficult as ducts and poles were in place for a short run to the chamber anyway. Vermin Media will have symmetric option at some point and hopefully they will also reconsider their pricing with more competition as more native fibre providers eat into their profit and customer base in the future.

      Hell, even BT might buckle and offer symmetric when XGS-PON (or newer) is eventually put in….

  3. Avatar photo NE555 says:

    “We focus on delivering for our customers and becoming the third network in the United Kingdom and that’s what drives me!”

    If they aim to overtake Cityfibre (who are behind Openreach and Virgin) then that’s a bold ambition.

  4. Avatar photo Flo says:

    Merger makes perfect sense.

    Sadly (and unfortunately) there will be job losses here if it goes through 🙁

    1. Avatar photo Aaron says:

      I hope they choose to not cut staff since they obviously have ambition to grow and investing in there already great customer service will only help that goal. Been so refreshing not being on hold for 40+ minutes and speaking to non-overseas service agents

    2. Avatar photo Flo says:

      Unfortunately job losses will happen. Not cost effective having duplicating support functions such as legal, procurement, IT, Finance etc. Just look at AllPoints for starters

  5. Avatar photo anon says:

    It begins …

  6. Avatar photo Greg says:

    I cannot believe this guy is spending his time doing merger deals with BRSK when he should be digging trenches and laying fibre to more properties. Back in my day CEOs would get their hands dirty, and be there on the line baking bread with the rest of us bakers.

    Everything has changed nowadays, always the fast track to success by combining your business with someone else’s. We wouldn’t even have wholemeal bread if they did things like this in the old days.

    1. Avatar photo RightSaidFred says:

      Netomnia don’t dig trenches. They go the PIA route, which you’d know if you read the article.

  7. Avatar photo Logan says:

    Bring on the merger, this is looking promising.

  8. Avatar photo Bob says:

    The market will and has to consolidate as it did with Cable TV . Given about two thirds of the UK can now get full fibre then his year is probably when the consolidation really starts to take off
    There is probably only really room for 3 or 4 infrastructure operators. The small players will simply fail to compete longer term as their costs will be to high

    1. Avatar photo Logan says:

      I agree there will be Openreach, Virgin Media/Nexfibre, and One or Two other national players. There will be a couple of regional players that will stay independent but that’s all.

    2. Avatar photo yeehaa says:

      It’s nice to read some sensible comments from Bob and Logan.

      As has been written in past articles on ISP Review, many of these smaller Alt-nets were always planned to be sold on to another Alt-net provider, private equity etc. by their investors from day 1. No doubt there are some financial backers that jumped onto the fibre bandwagon and are feeling their fingers getting burned, especially with inflation, higher interest rates, shortage of workers to roll out and general operating costs. Many of them will be looking bulk up to protect their investment or to bail out altogether. Some of course will go to the wall, which while in the immediate aftermath will cause uncertainty for customers, will inevitably be acquired by another alt-net.

      I suspect we’re going to see a lot of consolidation in the next couple of years.

  9. Avatar photo Stew says:

    It’s a wise choice, hopefully YouFibre will be the dominant of the two, they have a good business plan and are truly ambitious. I am hopeful of seeing them expand to my part of the country soon

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