People
Klaus Hoelbling
Partner & Managing Director, EMEA Leader, Technology, Media & Telecommunications
Munich
Market mechanisms tend to work effectively – this is especially true for capital-intensive industries such as the fiber optic market. After years of low interest rates, the COVID-19 pandemic and the crisis in Ukraine prompted an interest rate turnaround, triggering a new phase for the fiber optic market.
Business plans have been under scrutiny by investors and lenders for some time now. The focus is increasingly shifting from growth to financial performance, which is necessary to recoup the substantial investments in network expansion. However, this financial performance seems to be a long way off, especially for many smaller fiber operators. What usually follows from a market standpoint is consolidation, sooner or later.
In the AlixPartners European Fiber Survey 2025, we've taken a closer look at both the German and U.K. fiber optic markets, where significant consolidation is expected over the coming 12-24 months.
Many small players face a few large players in the fiber optic market
The fiber optic market is a patchwork of many small operators (figure 1). The leading association of fiber operators in Germany, BREKO (Bundesverband Breitbandkommunikation e.V.), now has almost 250 fiber operators among its members. These include utility providers, small local providers, and municipalities with their own fiber networks. There are also housing associations that directly equip their properties with in-house networks. The U.K. market has fewer players but still shows high double-digit numbers.
By contrast, there is a small double-digit number of larger fiber companies in Germany, and even fewer in the U.K. These are financed by external investors, large telecommunications providers and energy suppliers and are comparatively highly professional. The starting point for consolidation is therefore clear and typical in the market: many small players face a few large players.
Figure 1: German FiberCos – Key players vs. long-tail smaller companies
M&A activities remain limited for the time being, but operators and investors are ready to engage
Initial movement in the German market has already been observed. For example, Infrafibre Germany, which comprises the fiber operators BBV and Leonet, changed hands in October 2024. It is now part of UGG (Unsere Grüne Glasfaser), a joint venture between Télefonica and Allianz. Notably, media reports indicate that the purchase price was a symbolic €1.
Other large, financially robust players are also positioning themselves for M&A activity. For example, references to dedicated M&A teams can be found on LinkedIn and in job postings from pure fiber operators such as Deutsche Glasfaser and Deutsche GigaNetz. Industry giants such as Deutsche Telekom and Vodafone have been active in this space for years. Beyond completing acquisitions, they have primarily concluded joint ventures, including with leading energy companies. They are all likely to focus on four archetypes of potential takeover candidates: fiber optic networks of municipal utilities; smaller local fiber operators; state-supported networks of municipalities; and in-house L4 networks in multi-dwelling units (MDUs).
As different as these players are, many lack operational scalability and thus have limited long-term prospects for profits. Data from the British market (Enders Analysis, October 2024) shows that operating costs per customer are now on average twice as high as the revenues per customer of pure fiber companies. In combination with, in many cases, a small number of connected and paying customers in an under-utilized network, interest on the capital raised for the expensive network expansion will at some point no longer be able to be paid. If there is no rapid growth in the paying customer base that increases revenues, insolvency or a sale to avert this is threatened.
The U.K. market has historically experienced higher levels of M&A activity than the German market. While 2024 saw less dealmaking, the next months will tell if operators can shift gears again and return to M&A. As our survey finds, investors anticipate higher levels of M&A in 2025. This can be interpreted as a first hint towards increased activity, as they must support any strategic pivots of such magnitude. The German market is at least a few months behind, and any consolidation scenario is still a little further away.
In 2024, most operators took a step back from M&A to focus on improving their businesses, often making use of limited capital to stay afloat. Valuation expectations are also making deals challenging: large gaps are frequently observed between the valuation expectations of existing shareholders, based on original business plans and current market valuations. Even when expectations are aligned, consolidating existing debt across different FiberCos is not an easy task, given their notoriously extensive and complex covenant structures. A potentially simplified form of M&A deals could be the sale of network assets rather than the full company. Typically, the passive infrastructure part of the business changes hands in these types of transactions. A split into the network part (“NetCo”) and service part (“ServCo”) of the business has been a typical approach by Telcos globally to gain operational and financial flexibility, including opening options for M&A. This could be the way forward for FiberCos as well, if they consider M&A an exit opportunity. However, the network footprint and the quality of the network construction and documentation become key value drivers in this scenario.
The pace at which the M&A market will gain traction remains to be seen. As one respondent to the AlixPartners European Fiber Survey 2025 stated, “Everyone is waiting for the firing gun that triggers the first deals, and FOMO (fear of missing out) will create competitive tension”. Halfway into 2025, that gun has not been fired yet.
Fiber operators must decide whether to consolidate or be consolidated
For the few large companies that, alongside the ISPs, are leaders in terms of network size and revenue, this question is largely irrelevant. These industry leaders will continue to grow independently, consolidate smaller players, or seek further scaling opportunities by merging with peers. Similarly, this question does not apply to numerous companies within the sub-scale segment. Lacking a viable long-term business model, many of these companies will likely be consolidated or forced out of the market.
However, a small double-digit number of medium-sized companies will have to decide whether they want to buy sub-scale assets in order to achieve scalability, or position themselves as attractive acquisition targets for the larger remaining operators. Both options present attractive exit opportunities for existing investors and owners, but each requires different operational and strategic positioning, as well as additional capital in case of consolidation ambitions.
Sellers must ensure market attractiveness, while buyers need a robust acquisition engine
Sellers should evaluate whether their business and assets can serve as a platform for potential buyers, enabling the consolidation of other small businesses within the platform. Alternatively, they should assess where fiber assets can be integrated into existing business models as bolt-on acquisitions.
The most attractive sellers will be those who can demonstrate a sustainable business model and are well-prepared for integration. These sellers are likely to attract the attention of all buyers, whether they are seeking platforms or bolt-on acquisitions. Such sellers will have greater leverage in negotiating the terms of their sale. Additionally, even at higher purchase prices, they will offer a higher ROI to buyers due to their larger and more profitable customer bases, better network infrastructures and higher efficiency.
The AlixPartners European Fiber Survey 2025 highlights that buyers will prioritize assets with solid financial performance (figure 2). A robust customer base, along with its growth history and potential, is particularly important.
Figure 2: Criteria for potential buyers of FiberCos
Beyond the general financial performance of acquisition targets, buyers will consider the following details when making their purchasing decisions. Sellers should align their company accordingly to position themselves as favorably as possible.
- Clear customer and service segmentation
Sellers need to prioritize between their B2B and B2C deals while gaining clarity on how each deal drives growth versus profitability. Buyers want to see a stable customer base from a clearly defined market or customer segment. Whether the customer base is a strategic fit with the buyer's target portfolio will vary on a case-by-case basis, but also plays an important role in the decision-making process.
- Strong network footprint
According to the AlixPartners European Fiber Survey 2025, over 40% of respondents believe that network footprint will be the primary focus when evaluating acquisition candidates. A company with a strong regional presence, robust markets and expansion potential is extremely attractive, as strategic buyers believe that their own brand recognition can further accelerate and increase penetration.
- Transparency over customer acquisition costs
Companies often lack visibility into which marketing and sales efforts measurably increase sales. Salespeople need a defined customer acquisition cost strategy that is easily adopted by the prospective buyer. An effective strategy may be to limit marketing spend where possible, revise door-to-door sales plans, or even reduce sales teams.
- Efficient G&A organization
Finance and HR teams often lack the right tools to ensure timely analysis and reporting of business operations – a problem that is exacerbated by the integration of new assets. Establishing effective back-office teams is critical to scaling the organization.
- Robust technology infrastructure
Sellers with a robust technology infrastructure enable buyers to integrate their assets more easily. More robust infrastructure also promotes greater synergies with buyers' existing technologies.
Buyers – start your acquisition engines
Although the number of potential targets is high, the selection of truly attractive companies that will work as a platform or bolt-on acquisition in an individual context is likely to be limited. The winners will be those buyers who can approach targets most efficiently and quickly. Examining how an integration could occur post-acquisition is essential for buyers aiming to achieve cost-effective growth. With a dedicated deal team overseeing the entire M&A process and an experienced integration team implementing the post-merger integration, buyers have higher chances of integrating new assets seamlessly into their existing corporate structures.
Figure 3: Expected M&A activity in 2025/26
AlixPartners has been successfully supporting banks, investors, and operators of fiber optic networks for many years in solving strategic and operational challenges within the dynamic fiber optic market. 85-90% of respondents in the AlixPartners European Fiber Survey 2025 expect moderate to strong M&A activities in the German and U.K. fiber optic markets in the next 24 months. With the right strategies in place, buyers and sellers can successfully navigate this environment and emerge stronger.
