Broadband groups Netomnia and Brsk agree tie-up as ‘altnet’ M&A continues

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UK broadband providers Netomnia and Brsk are merging in a deal that marks the largest consolidation of alternative network providers yet, as the sector attempts to challenge BT and Virgin Media O2 in the rollout of full-fibre across the country.

The companies agreed the tie-up on Wednesday, which will create one of the largest so-called “altnets”.

Investors have poured billions of pounds into altnets, which position themselves as alternatives to the incumbent providers of full fibre. Consolidation in the sector has been widely anticipated as the industry turns its attention from laying fibre to signing up customers, with backers hoping to recoup their investment in the digital infrastructure upgrade.

Other mergers and acquisitions in the sector have included leading altnet CityFibre in March announcing it would acquire Lit Fibre and Virgin Media O2 in September agreeing to acquire Upp, which the Russian oligarch-backed investment company LetterOne had been forced to sell on national security grounds.

The deal will involve Brsk moving under the umbrella of Netomnia’s parent holding company, Substantial Group, but it will be run as a separate entity with Giorgio Iovino, Brsk’s chief executive, remaining in the role.

A new wholesale company will also be created, which will aggregate the two networks and eventually seek to acquire other altnets.

No financial details were disclosed. Substantial Group will be valued at £1.1bn after the merger with Brsk, according to people close to the matter.

Jeremy Chelot, chief executive of Substantial, Netomnia and sister internet service provider YouFibre, told the Financial Times the tie-up was “one big step towards [the] goal” of becoming the third-largest full-fibre network in the UK to rival BT’s Openreach and Virgin Media O2.

He added that fragmentation in the market — which includes dozens of altnets — had created “uncertainty”, and the deal could contribute towards an “environment which is sustainable from a competition standpoint”, with the company also interested in further consolidation.

The full-fibre services provided by the two companies will be available to 1.5mn premises with 140,000 customers connected already. The group plans to use up to £900mn of debt to reach 3mn premises and about 500,000 customers by the end of 2025.

Iovino said the pair would break even on earnings before interest, taxes, depreciation and amortisation “a lot sooner by coming together” and the group was positioning itself as an “attractive consolidator” and an alternative to other dealmakers in the market.

The Netomnia-Brsk deal is set to be finalised in the coming weeks, subject to regulatory approval. No job cuts are expected.

The collective altnet footprint reached 12.9mn premises and 2mn customers at the end of 2023, according to the Independent Networks Cooperative Association.

Incumbent BT is investing £15bn in its own full-fibre project and in May said it had reached more than 14mn homes and 4.8mn customers. The FTSE 100 company reported broadband line losses of 491,000 in its 2024 financial year and warned of “moderately higher competitor losses” if the market remained weak over the next 12 months.

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