BT Scraps Hunt For Openreach Partner As Fibre Rollout Costs Fall

The BT's hunt for an Openreach partner is coming to an end as its fibre rollout costs fall. What's next for the telecoms company? Let's take a look at BT's investment strategy, its preferred suitors and the company's cost-cutting programme.

BT's investment plan

BT has announced plans to boost its investment in fibre broadband. The company initially planned to spend 1.5 billion on the project to provide faster broadband to 40 per cent of homes in the UK by the end of 2012. It now plans to cover four million homes by the end of 2014 and 66 per cent of homes by the end of 2015. Despite the delays, BT's plans are still encouraging, and the company is seeking partners to fund the fibre rollout.

The company's fixed line subsidiary Openreach will increase its investment to reach the goal of 25 million homes in five years. This plan will allow it to build fibre networks faster and cheaper than originally planned. In the first half of this year, the company will invest PS2 billion in the fibre rollout and expects to reach this target by the end of 2026.

BT has said that the investment will enable it to extend its fibre network across the UK to 25 million premises by the end of 2026. It also notes that lower costs and strong demand will support a return for investors.

BT's plans for fibre rollout

BT says it will “build like fury” to roll out fibre broadband services in the U.K., a target it says it will hit in a decade. The company's fibre network covers nearly six million premises, and it has already reduced its average build costs by 15%, from PS400 to PS250 per premises passed. Openreach has now gone live with more than one million homes.

Openreach has been investing in new equipment, training and facilities to help lower the build costs. It now has the capacity to build more than 4 million premises each year. It can also build up to 75,000 premises per week. That means that it can build around 15,000 premises a day – a record-breaking rate. Openreach is also working towards connecting 4.8 million homes and businesses in rural areas.

BT says it will spend PS100m in the first two years and PS800m for the remaining three years. This works out to an annual access fibre budget of PS266m. The company also said that it plans to pass one property with fibre in three years, which is significantly less than FTTC.

BT's preferred suitors

BT has signed up ten broadband retailers to long-term pricing deals under which they will primarily sell full-fiber services. The move signals an acceleration in BT's transition away from copper. Currently, the company is connecting around three-quarters of the UK's 28 million premises.

BT has also made a number of strategic moves over the last few years. It is now preparing for a key football rights auction and a deal to buy mobile operator EE. It has also agreed to a new pension deal with pension trustees. It has also increased its Fibre-to-the-Premises rollout plans. It aims to cover 25 million premises in the UK by 2026.

BT plans to cover 25 million premises with full-fibre by 2026. Virgin Media O2 is the second-largest infrastructure investor, with plans to upgrade 15.5 million premises by 2028. Meanwhile, CityFibre is targeting eight million premises by 2025.

BT's cost-cutting programme

BT has scrapped its hunt for a joint venture partner to complete the rollout of fibre across the UK and accelerated its own rollout programme. With fibre coverage reaching over six million premises, the company has reduced average build costs by 15% to PS250-350 per premises passed. BT also plans to roll out fibre to 20 million homes and businesses by 2026.

BT's ambitious cost-reduction programme has been successful. It has already hit its PS1 billion cost-cutting target, 18 months ahead of schedule. It has also brought forward its PS2-billion capex target to 2024 and 2025. The success of fibre rollouts means that capex will peak at PS4.8 billion by 2023. The company has confirmed its full-year 2022 and 2023 guidance.

BT's move also gives Virgin Media more freedom to compete with BT Retail. It could backhaul coax loops with FTTC fibre to compete with BT Retail. That could be good news for consumers who want a fast, cheap internet service. But it also means that BT will not be able to compete with Virgin for customers on the FTTC network.