TalkTalk to use CityFibre for business customers

UK telco TalkTalk has announced that it will use CityFibre’s network to serve business customers, a move that is naturally being viewed as a blow to incumbent supplier BT.

The two companies revealed on Thursday that they have inked a strategic partnership that will enable TalkTalk’s wholesale division to offer customers access to CityFibre’s business Ethernet infrastructure.

The deal is all about offering more choice to wholesale customers…and doubtless there’s a price advantage too, with TalkTalk bigging up “compelling pricing” as well as increased flexibility and so forth.

It forms part of TalkTalk’s broader altnet strategy, through which it aims to increase the number of providers it works with, “across numerous products from FTTP to Ethernet,” the telco said. It also intimated that it expects a number of other Ethernet suppliers to join its platform over the next year.

Further, “TalkTalk believes a third of new Ethernet connections could go to altnets, including CityFibre,” the company said.

If all thoughts in the industry didn’t immediately go to BT when the partnership was announced, they certainly did when that prediction came to light. BT – which was already having a difficult day on Thursday, having announced plans to shed some 55,000 staff, or 42% of its workforce, by the end of the decade – serves TalkTalk’s Business Wholesale Services unit via the Openreach network. While altnets benefit from the diversification of suppliers, the incumbent surely loses out.

Obviously, TalkTalk and Openreach themselves aren’t saying anything on that score. But others are.

Bloomberg points out that TalkTalk’s Business Wholesale Services operation generates around £300 million per year, and therefore calculates that the incumbent could be looking at losing in the region £100 million annually as a result of TalkTalk opening up to altnets.

That’s clearly over-egging it a bit. TalkTalk specifically claimed that a third of new Ethernet connections could go to altnets in the coming years, not a third of the entire business. Nonetheless, there is a financial loss for BT, and one it could certainly do without.

But while the impact on Openreach is the most interesting angle of this story, it’s not what the parties involved are dwelling on.

“CityFibre is already the largest alternative network, and this new B2B partnership opportunity will continue to grow as its footprint expands and product portfolio widens,” said Tom O’Hagan, Managing Director of TalkTalk Business Wholesale Services.

And there were the usual pleasantries from CityFibre too.

“The combination of TTBWS’s scale and automation, with our growing portfolio of differentiated business connectivity products represents a compelling proposition in the industry,” said George Wareing, Chief Sales Officer at CityFibre. “We’re delighted that TTBWS see the benefits that access to these products will bring their customers across the country and we look forward to a long and successful partnership.”

Presuming the partnership does indeed prove successful, it will affect Openreach, but the implications for the incumbent are broader than just this deal. With the number and reach of alternative providers growing in the UK, the competition for network access will only get more intense.

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