NR/BBB/BBB

Not a likely spread mover though relevant to BT’s ongoing line losses to “alt net” providers which took the limelight in their Q2 results which we judged to be mixed on a top line beat but op income softness.

• The Telegraph reports that Sky is to launch broadband services on CityFibre’s network in 2024, expanding beyond BT’s Openreach which hosts Sky’s 5.7m broadband customers. Sky aims to cover 1.3m rural homes via this deal; while there is overlap, the article notes that Sky will mostly expand its customer base in areas that Openreach does not currently cover.
• We’ve flagged weakness in BT’s broadband KPI’s as a source of discussion in recent earnings reports; in Q2 Openreach’s EBITDA was +5.8% YoY driven by ARPU growth of ~6% though with line losses of close to 200k losses (against BBG consensus of <150k) on a weaker new homes and overall broadband market.
• As per the article, CityFibre currently reaches 3.8m premises, targeting 8m by end of 2024 against a backdrop of financial strain with GBP 1.8bn debt; CityFibre saw profitability in Q124 but continues to face consolidation pressure with Virgin Media O2 reportedly having explored a potential acquisition. Virgin Media recently announced plans to offer wholesale access to its network and was reportedly in talks with Sky about a potential deal.