Analysis of Q2 2023 UK ISP metrics
In summary
Total Q2 2023 FTTH/P/B, FTTC, cable, FWA/satellite and DSL wholesale connections decreased during the quarter and stood at an estimated 29.09m down from 29.20m q-o-q and only up slightly from 29.02m y-o-y; retail consumer and business connections declined to an estimated 28.99m from 29.05m q-o-q up slightly from 28.63m at the close of Q2 2022.
The fixed broadband retail market slowdown resulted in a loss of c.64k net broadband subscribers with y-o-y uptake growth falling to a modest 1.2%.
Openreach’s FTTP connections base has grown by 383k q-o-q and reached 3.50m up from 3.12m.
Virgin Media O2’s (VMO2s) fixed segment showed a reduction in its subscriber base with losses of ~15k in Q2 compared to 29k additions in Q1 bringing its broadband customer base to 5.66m.
CityFibre’s (CF’s) nationwide full fibre network reached 3m premises in August, with more than 2.6m ‘ready for service’ to ISPs; we estimate CF to have around 245k connections at the close of Q2 2023.
Sky UK continues to shore up its European operations and we estimate Sky UK to have closed the quarter with 5.68m broadband subscribers.
TalkTalk experienced high churn rates for the second consecutive quarter with 102k net losses at the close of Q2.
AltNet operators FTTx (pre-dominantly FTTH/P/B) ISPs subscriber numbers are slowly on the rise; we estimate the total number to be around 1.53m at the close of Q2 2023.
Openreach nearly reaching halfway point of FTTP rollout target as take-up rates on the rise
Openreach reported that it has reached 44% of its 25m premises passed by 2026 build target with 11m homes and businesses now covered. It has a further 6.2m premises classified as ‘work in progress’ (WIP) with around 3.2m premises in its total footprint being in rural locations. Its FTTP subscriber base reached 3.5m with quarterly net adds of 383k. Its FTTP penetration rate reached 31.9% up from 30.4% in the previous quarter (see Figure 1 below), which is much higher than what most AltNets are averaging (usually ranging between ~2% to ~20%). The difficult market conditions, the squeeze on consumers’ finances, and overbuild in larger more commercially competitive areas continue to be a challenge for AltNets.
VMO2 sees fixed line subscriber losses but nexfibre deployments gaining momentum
VMO2’s Project Lightning rollout, mostly using FTTP (with a mixture of RFoG and XPS-GPON) drew to a close at the end of 2022. In its Q4 2022 results it VMO2 stated that it had passed 188k premises with 24k of those being subsequently transferred to nexfibre at the close of the year.
In Q1 2023, the supplier reported that it had expanded its full fibre network by 107,800 premises primarily from rollout on behalf of nexfibre increasing this to 175,500 premises at the end of Q2 (Figure 2).
VMO2 ended the quarter with headline fixed line subscriber net losses of around 25k which is markedly down from the gains of 21k in the previous quarter. The provider reported overall net broadband losses of ~15k bringing their fixed broadband subscriber base to 5.667m up only 1 ppt y-o-y from 5.612m.
Retail and business connections continue to decline
The second quarter of 2023 saw a significant reduction in overall fixed broadband subscribers with a loss of ~64k, bringing the total to 28.991m (Figure 3). This downward trend will continue over the next several quarters as consumers continue to struggle with the cost of living crisis and in some cases make the switch to mobile broadband only.
We estimate the consumer sector to have seen the biggest decrease during the quarter coming in around 47k fixed broadband reductions and business losing just under 17k subscribers. We estimate the total consumer segment connections to have dropped to 27.460m with business subscribers decreasing to 1.531m.
Wholesale connections remain static in challenging conditions
At the close of the quarter, we estimate wholesale connections to have reached
29.078m, down from 29.204m. Similar to the retail sector, growth has been marginal over the past several quarters. As reported above Openreach’s continued loss of connections due to dual technology copper to fibre switchover, wholesale connections will continue to see little to minimal growth for the rest of the year.
Overall net broadband connections reduced by -0.4% q-o-q and grew a meagre 0.1% y-o-y. Despite the increase in FTTP network coverage by major and independent suppliers this small level of annual 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 2.423m during the quarter down from 2.654m during the previous quarter. FTTC connections decreased to 15.409m compared to 15.690m in Q1 and 16.406m the previous year. FTTP lines are progressing and have risen to around 5.090m up from 4.694m and up from 3.402m at the close of Q2 2022 (Figure 4 below).
Email Veronica Speiser at veronica.speiser@point-topic.com for more information.
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