Tesco Mobile explores broadband relaunch in UK telecoms market

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Tesco Mobile broadband relaunch

Highlights

Tesco Mobile has held preliminary talks about launching fibre broadband services using Virgin Media O2 and Nexfibre networks but has not made a final decision.
Tesco's potential re-entry into broadband follows its 2013 exit and comes as its mobile customer base grew from 4.4 million in 2015 to 5.8 million in 2024.
The UK broadband sector faces intense competition, with over £31 billion invested by operators and altnets facing weak customer growth and high construction costs.

Early-stage broadband plan takes shape

As first reported by Financial Times, Tesco Mobile has held initial talks about offering broadband over fibre networks run by Virgin Media O2 and Nexfibre, according to two people familiar with the matter. The company is exploring whether a broadband product could complement its existing mobile base and deepen customer loyalty.

Tesco Mobile, jointly owned by Tesco and Virgin Media O2, already ties its mobile offering to the Clubcard rewards programme. A similar model could be extended to broadband users, potentially offering incentives such as points or discounts to encourage take-up.

The discussions remain at an early stage, and no final decision has been made on launching broadband services. Tesco Mobile says that, as part of the normal course of business, it has regular conversations with potential partners about opportunities, but adds that it currently has no plans to launch into the broadband market.

Competitive pressure in a fragmented sector

Tesco’s return would revive a broadband business it exited 11 years ago when it sold a previous service with 75,000 customers to TalkTalk. Since then, it has focused on mobile, growing from 4.4 million customers in 2015 to 5.8 million this year, according to Enders Analysis.

A new Tesco offer would enter a UK broadband market already crowded with established operators and dozens of alternative network providers seeking to challenge Virgin Media O2 and BT. Many of those altnets have struggled with weaker-than-expected customer growth and high construction costs after more than 31 billion pounds was raised to expand fibre broadband across UK households.

James Ratzer, an analyst at New Street Research, says the increasingly crowded UK mobile market means it makes strategic sense for Tesco to extend its brand into broadband. He adds that the move would also underline how competitive the wider UK telecoms market is becoming, while Virgin Media O2 and Nexfibre decline to comment.

Tesco Mobile’s exploratory talks on launching a fibre broadband offering come as UK companies weigh major strategic moves in a shifting market backdrop. In our earlier article, we covered how boards at UK-listed firms such as Segro and easyJet have pushed back against unsolicited takeover approaches, arguing bids still undervalue their assets despite sizeable premiums. We also noted that sustained deal interest and a stronger FTSE 100 may indicate the long-standing valuation discount on British equities is starting to narrow.

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