Altnet consolidation is coming, but it will not be tidy

On 10 August Rajiv Datta, chief executive of nexfibre, the wholesale fiber builder owned by InfraVia, Liberty Global and Telefónica, told Mobile Europe in an interview that fiber is the glue holding the AI and data center boom together, and that the UK’s alternative network (altnet) market is fragmented, financially fragile and mostly loss-making. Consolidation, he said, is the route to a sustainable challenger to Openreach. Without it the market would get more of what it was already seeing: “failing altnets, some in a messier way”.

Datta told the magazine that data centers create the data and mobile networks move it, but much of that traffic is backhauled onto fixed fiber, and that symmetrical, low-latency service will matter more than headline speed once AI applications arrive. Those networks were financed with debt just as interest rates rose. For a wholesale operator, he said, scale is what counts. The outcome he wants to avoid is an altnet collapsing and leaving a large customer base without service, which he acknowledged has not happened yet.

He is not a neutral witness. Chief executive since October 2023, he is running the one large consolidation deal in the market. On 18 February nexfibre agreed to buy Substantial Group, owner of Netomnia and YouFibre, at a £2bn enterprise value. The release puts the investment behind the deal at £3.5bn, takes the combined footprint from 2.6 million premises in February to around 8 million by the end of 2027, and hands Virgin Media O2, nexfibre’s anchor tenant, about £1.1bn in cash and an indirect 15% stake in return for committing its wholesale traffic on 4.6 million premises. Completion was expected by Q3 2026, subject to regulatory approval.

A would-be consolidator says consolidation is the answer, which does not make him wrong. On direction he is right: a market that Mobile Europe says has seen more than 100 altnets enter, most of them loss-making, will not stay that way. Where I part company with him is the assumption that consolidation arrives in time and in order, so that messy failures happen only if it is blocked. The evidence since 1 July says the messy failures happen anyway, and that they land on the channel first.

What the summer has already shown

Start with the consolidator’s own deal. On 1 July nexfibre said it had asked the Competition and Markets Authority (CMA) to fast-track the Netomnia purchase straight to a phase 2 review. Datta’s words on the company’s site: “Every day of delay reinforces the incumbent’s advantage and slows the progress of genuine competition.” If the best-funded deal in the market is asking for an in-depth regulatory review to close, the dozens of smaller networks with no buyer will not be tidied away on a timetable.

Then look at who is failing. On 8 July Airband, the rural fiber and wireless operator, confirmed to ISPreview that it had started a formal sale process. ISPreview reported that its backer, Aberdeen Group, has put more than £200m in, and that its 2024 accounts show revenue of £6.7m against an operating loss of £47.2m. A sale process is not a sale. On 29 July HM Revenue and Customs (HMRC) filed a winding-up petition against Fusion Fibre Group, a small rural builder, according to ISPreview’s report of 4 August, which records that the company disputes the debt and that its last accounts show negative net assets of £5.8m. Nobody is consolidating Fusion Fibre.

Even the largest altnet is retrenching rather than acquiring. CityFibre agreed to sell Entanet, its wholesale aggregation business, to Tom O’Hagan, the founder of Virtual1, its release of 1 July says, to focus on services over its own fiber. On 15 July it proposed changes that ISPreview reported could affect about 200 roles, in a letter to staff that blamed slower consolidation than the company had planned for.

Where the exposure really sits

Datta’s worst case is an altnet failing with customers still on it. For a reseller or MSP that is the wrong lens. When an altnet fails, the end customer’s contract sits with you, not with the network, and the fiber sits with the lender. The partner who has sold a three-year business connection over a rural altnet has a wholesale problem: pricing, service levels and the right to keep the circuit all depend on a counterparty that may not exist by the time the customer calls. And the aggregator layer is moving too. Fusion Fibre sells off its own network through CityFibre, Freedom Fibre, FullFibre and ITS, ISPreview reports; Entanet has changed hands. A reseller can be two or three contracts away from the company whose survival decides its service.

The audit every altnet supplier needs

Three checks, before the end of September, not after the first outage.

• Runway. Pull the latest accounts from Companies House for every altnet and aggregator you resell, and read the going-concern note and the debt maturities. Loss-making is normal for a builder; a sale process run for the lenders is not.
• Change of control. Read the wholesale agreement for what happens on a sale, an administration or a change of ownership. Do pricing and service credits survive? Can an acquirer terminate or reprice? Is there a transfer right if the network stops operating? If the answer is silence, negotiate the clause now, while the supplier still needs your volume.
• Migration. For each customer on an altnet, know which other network passes the same premises, what a like-for-like circuit costs on it and who pays for the install. Where the only alternative is Openreach, price that in before you renew, not after.

Datta will probably get his consolidation. But the neat version, where the strong buy the weak before the weak fall over, is a story infrastructure investors tell each other. Resellers should plan for the version where the weak fall over first. When an altnet fails messily, the mess does not stay with the network. It goes to whoever signed the wholesale contract.