No Buyer for Digital Region in South Yorkshire UK as Losses Continue

The debt ridden Digital Region (DRL) network, which has gobbled up over £100m of public money to cover 80% of premises in South Yorkshire (England) with a superfast broadband ISP platform (alternative to BT’s infrastructure), has so far failed to find a buyer for its service and today reported more financial losses.

The operator had originally hope to award the contract to either ETDE SA (Entreprise de Transport et de Distribution d’Electricité) or the more controversial choice of BTWholesale Managed Services by December 2012 (here), which is roughly when their last injection of £10m to keep the network afloat was expected to run out (here).

Any delay could conceivably result in DRL having to be supported with yet more public money, more than would have been anticipated had a sale been achieved. As it stands DRL has just submitted its report and financial statements for the year ended 31st March 2012, which revealed an operating loss for the year of £14,285k (£14m), before exceptional costs of £62,936k.

The exceptional costs are claimed to be as a direct result of the accounts being “prepared on a break up basis“, which requires DRL to write down the value of its assets. This has been necessary because DRL has yet to conclude the procurement process to appoint a new operator of the network.

But DRL are keen to stress that “this does not mean that the network is being broken up, or that the exceptional costs will materialise“. The process to find a new operator, which would be accountable for the network’s revenues, costs and risks, is still said to be “ongoing” and is “on track for completion in early 2013“.

David Cowell, Chief Operating Officer for Digital Region, told ISPreview.co.uk:

“Whilst these financial results appear disappointing, they are in line with the forecasts for the business so this outcome is not unexpected. The focus remains on moving DRL to the next phase of its development.

The intention remains to select a new operator that will ensure the network delivers on its original remit of digital transformation across the region, and provide quality and value for money for South Yorkshire residents and businesses.

A total of 29 expressions of interest were received in the initial stage of the procurement process and we are now working with two shortlisted bidders in the final stage.

A world class superfast broadband infrastructure is now in place, and we’re working to ensure that the people and businesses of South Yorkshire benefit from the transformational potential it offers.”

Teresa Robbins, MD of DRL ISP LittleBigOne.com, added:

“There is significant cost associated with creating something as complex and cutting edge as Digital Region’s superfast internet infrastructure, and – thanks largely to European Union funding – more than 80 per cent of households and businesses in South Yorkshire now have access to some of the fastest and most resilient broadband connectivity available in the UK.

The fibre optic technology Digital Region has installed under South Yorkshire is not going anywhere and customers can buy internet services delivered over the network with confidence. The number of subscribers to littlebigone.com’s superfast broadband services, which are delivered over the Digital Region network, have soared over recent months.”

Last month the COO of UK ISP ASK4, Ross Bray, told ISPreview.co.uk that the new owner of DRL must turn it into a “credible” and “competitive .. alternative to the standard BT product set” if it is to survive (read our interview). But that can only work if BT doesn’t win the contract. However others suggest that BT may now be the most logical choice to save DRL; the irony of that would surely not be lost on anybody.

As it stands DRL’s real problem remains its lack of subscribers and their failure to attract any big name broadband ISPs, although the new Service Exchange Platform (SEP) and recent special offers might be able to change all that. But this will take time and meanwhile DRL still needs to pick a buyer, which would at least help the operator to edge towards sustainability.