8 hours ago
Community Fibre eyes mobile market launch to rival big networks
A broadband company led by the former bosses of EE and Virgin Mobile, and backed by Warburg Pincus, the American private equity firm, is considering the launch of a new mobile telecoms operator.
Community Fibre is exploring opportunities to start offering e-Sim services as early as this summer, before eventually rolling out virtual Sim-only contracts, in an effort to capitalise on its existing customer base of almost 400,000 through cross-selling mobile services.
An e-Sim replaces the physical Sim card in a phone and enables users to switch easily between different providers, using a cheap local network when travelling.
The new operator would initially be launched under the company's existing brand and, like other mobile virtual network operators (MVNO), would use the network of another provider rather than building its own infrastructure.
Community Fibre is one of a number of alternative network providers, or 'altnets', that have sprung up in recent years to challenge Openreach and Virgin Media O2 in building full-fibre networks.
However, its management team has ample experience in the UK mobile market. Graeme Oxby, its chief executive, previously led mobile operations for Virgin Media, which was later bought by Liberty Global and merged with O2, while Olaf Swantee, Community Fibre's chairman, was the former chief executive of EE before its takeover by BT.
Such a move would mark the latest shake-up of the UK's mobile sector, which has led to MVNOs gaining a greater share of the UK market, heaping pressure on the larger network infrastructure operators: EE, O2 and the newly merged Vodafone-Three.
Research by Enders Analysis showed that the UK's network operators lost contract subscribers for the first time last year, while MVNOs gained 1.65 million.
The research specialist attributes the rise of virtual operators to the cost of living crisis and longer handset lifespans, which has increased demand for Sim-only contracts, 'a traditional area of strength' for the MVNOs.
Vodafone-Three has said it is aiming to attract more MVNOs, a market that it has traditionally underplayed in, with only 10 per cent of virtual operators in the UK using its network.
However, altnets have also come under increasing pressure from rising costs and debt levels, as well as heightened price competition as providers attempt to recoup the huge investment in building their infrastructure by bringing more customers on to their networks.
Community Fibre, which has built out its network to 1.3 million premises, generated adjusted earnings before interest, taxes and other items of £8 million last year, which it expects to increase this year.
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However, it made a pre-tax loss of £119 million last year, according to its latest accounts filed at Companies House. It has said it expects to be 'cashflow positive' during the first half of next year, from an outflow of £8 million the year before.
The challenges have raised expectations of a consolidation within the sector, although merger and acquisition activity has yet to gather momentum, which some analysts have attributed to a lack of potential buyers able to pay cash for targets and institutional backers being unwilling to accept a writedown in the value of their businesses at takeout.
