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Gigaclear Raise £111m for 1Gbps Rural Broadband to 150,000 UK Premises

Friday, May 5th, 2017 (7:30 am) - Score 2,105

Fibre optic broadband ISP Gigaclear has raised £111 million in new equity funding to help achieve the current target of making their 1Gbps capable Fibre-to-the-Premise (FTTP/H) network available to 150,000 premises in UK rural areas by around 2020 (mostly in England).

Last month the provider reported that their network was already available to 42,000 rural properties (with 10,000 active customers) around counties such as Berkshire, Buckinghamshire, Cambridgeshire, Essex, Hertfordshire, Gloucestershire, Kent, Leicestershire, Lincolnshire, Northamptonshire, Oxfordshire, Rutland and Worcestershire.

Many of the above deployments are recent developments that have stemmed from a growing number of significant state aid broadband contracts (recent examples here, here and here), which have been helping to grow the provider’s fibre optic network coverage at an increasingly rapid pace.

At the same time that the Government’s recent moves to support alternative “full fibre” network (altnet) providers with £600m of public funding (details) has helped to give investors’ confidence in the market, which has also been supported by Ofcom’s move to make Openreach’s (BT) national network more accessible to rivals (here).

All of this has in turn resulted in existing investors – Infracapital (£60m) and Woodford Investment Management (£15m) – joining with new investor Railpen (£35m), a railways pension scheme, and smaller investors (£1m) to raise £111 million.

This should help Gigaclear to meet their current contract obligations and to secure future contracts in other parts of the UK by focusing on the bits that BT struggles to upgrade.

Matthew Hare, CEO of Gigaclear, said:

“Full fibre is the future. This latest round of investment will enable Gigaclear to step up our speed of network delivery and is a clear signal of the confidence investors have in our continued expansion and success.

Millions of rural homes and businesses across the country need better broadband and we want to reach as many of those in rural areas as quickly as possible. Our pure fibre network transforms lives by providing access to the fastest internet speeds to be found anywhere in the world and technologically future-proofing these rural communities for years to come.”

Paul Bishop, Railpen’s Investment Director, said:

“As a long-term investor, we see the partnership with Gigaclear as a natural fit that will allow us to generate strong returns over time and fulfil our mission to pay members’ pensions securely, affordably and sustainably. We are also delighted that the company will be supporting local communities by bringing the benefits of best-in-class fibre-optic broadband to homes and businesses in new parts of the country.”

All of this is on top of the many tens of millions that Gigaclear has previously raised to help fund their deployment, such as last year’s loan of €25m (euros) from the European Investment Bank (EIB) and various private equity funding rounds worth around £50m. Back in 2014 the ISP envisaged that they could cover 200,000 rural properties with capital of £180 million and this appears to be holding true.

In case anybody missed it, Gigaclear’s latest accounts to December 2016 can be found online and this shows that their group revenue for the year was £3.5m (up from £1.4m in 2015) with net assets of £50.1m (up from £36.3m), although they made an operating loss of £10.8m (worse than 2015’s £6m); this is to be expected while the ISP remains in a heavy spend and build strategy.

The results also revealed that a “typical” Gigacler subscriber on their 1Gbps broadband package will use 2058GB (GigaBytes) of data per month, which is well above Ofcom’s average of 169GB for “superfast broadband” (30Mbps+) users.

UPDATE 12:07pm

Despite focusing on very different sides of the “full fibre” market, Cityfibre has weighed in on today’s news to welcome the development.

Greg Mesch, CEO at CityFibre, said:

“We congratulate Gigaclear on their success. This is not only welcome news for the rural communities stranded on unsuitable copper infrastructure, it also serves to highlight the crucial role and growing momentum of competitive full fibre players and the rapidly increasing market support for full fibre investment.

Alternative network providers like Gigaclear and CityFibre are playing a central role in transforming the UK’s digital infrastructure. This will ultimately contribute towards safeguarding the nation’s future as an economic force in a digital world.”

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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10 Responses
  1. bdo21 says:

    2058GB is a lot of data per month! I understand some heavy users (file sharing, gaming, movie downloads, etc.) and businesses could use this but it is an average number. It is an average for their 1Gbps package which presumably attracts the heavy users but it is still higher than I would have expected

    1. Mark Jackson says:

      Not really. If you’re paying for 1Gbps then you need that speed for a reason and any videos you stream will automatically default to the best possible resolution (4K etc.). These days it’s a lot easier to gobble a TeraByte, even on slower connections.

    2. Harold Wren says:

      Bear in mind a lot of IoT devices chew bandwidth – for instance Nest Cam can use up to 380GB/mo of data per camera!

  2. h42422 says:

    Where are all the companies raising funds to provide urban broadband? This is not the first time something like this has happened with a “rural” prefix, which is of course a positive thing. I just keep wondering why no one seems interested in raising funds to provide FTTP/H to urban areas.

    There are a lot of urban areas as well perpetually ignored by Openreach. Why is no one raising funds from investors to target this, only rural parts seem to be getting this kind of attention? There are of course urban providers as well, but their business is based on high rise buildings instead of pouring investor money to cabling areas currently lacking fibre.

    Just curious. And frustrated that both government money and private money seems to focus in rural broadband improvement, leaving urban areas under “large blocks only” radar to the dark ages.


    1. Mark Jackson says:

      There are already quite a few FTTP deployments in urban areas, with operators like BT, Virgin Media, Hyperoptic, Cityfibre and so forth all heavily involved in that field. The investment model isn’t such a challenge in those locations and private money should be able to deliver, assuming the operators have a desire or reason to do so.

      The reason rural parts get the news is because it’s a much bigger deal and challenge to put full fibre into such locations, where the commercial models of urban areas breakdown and so many people suffer slow speeds.

      On top of that a lot of the urban FTTP providers don’t give us a lot of detailed roll-out updates, they usually come in bite sized pieces every once in awhile. Rural providers communicate more.

    2. h42422 says:

      I understand the rural challenge and need for public money there, I was mostly curious about the presence of private investor money.

      Is there currently someone using their own or investor money cabling London townhouses with EO lines? Virgin seems to be expanding to new areas, true, and Openreach might do an occasional line rearrangement. But to me it seems investors rather fund digging new fibre infrastructure in rural areas than in London.

      Which of course is their right, and the more solid internet infrastructure we get anywhere in this country, the better. There just seems to be this overwhelming belief that the “investment model” and “private money” will eventually solve the inner London infrastructure problem.

      To me it looks like the business case for private money is not actually there. if it were, inner London constituencies would be on the top of availability rankings, instead of being somewhere in the bottom 100. These areas are as urban as they will ever get. Very little will be built in these areas anymore to improve their attractiveness or potential customer base. Private money has now had five years to sort out the problem, and instead of rushing to invest into these heavily urban and moderately affluent areas and replace outdated copper and aluminium EO lines by digging up every street, they have been investing mostly elsewhere, blaming costs and bureaucracy.

      Is the trust in the commercial model maybe somewhat misplaced?

      I am just curious, as I do not see anything in the horizon that would change the business case in any of these areas. In rural areas this has been solved by gap funding but in urban areas we have only the mantra of the benevolent commercial model that has failed to deliver this far.

      USO might change this if it ever becomes a law.

    3. GNewton says:

      @h42422: You’ll never have widespread fibre in the UK. The whole framework set by various governments, along with failures on the part of Ofcom and BT, are all stacked up against fibre investment. The whole idea of relying on competing commercial fibre deployments simply doesn’t work. It will always result in cherry-picking certain areas.

    4. 125uS says:

      I think potential investors are wary as they may never see their money back. Much of the work in these rural rollouts is done by volunteers, alongside landowners waiving their legal right to wayleave payments. That model would be hard to replicate in an urban setting. It’s more expensive to reinstate a pavement than a trench across a field or in a verge and councils won’t allow volunteers to do streetworks.

      There’s also the issue of demand. Where Virgin and BT roll out something faster than ADSL most people don’t buy it. The majority remain on whatever is cheapest. In urban areas quite a few people have no fixed line comms at all and rely on their mobiles for everything.

      As the Telecoms CFO mantra goes “Build it and you will go bust”. All the time the regulatory regime favours providers reselling services provided over BT’s last mile network the sums don’t really stack up in terms of building your own. The dark fibre regulations coming might well change that, but until now, it’s a brave telco who borrows £2000 from the bank to install a line they could rent from BT for £15 a month.

      Mandating wholesale network access at very low rates discourages investment in alternative networks, I think.

  3. Fred the Red says:

    Interesting that there is £110m of new institutional cash and just £1m from private investors.

    There is lots of new cash coming in to the space as patient capital but how patient will new investors be. we see companies with more revenue/ customers than Gigaclear growing
    fast with much less cash.

    Also the more cash you get doesn’t mean the company will deliver more, it quite often ends up with the build it and they will come mentality or through enough cash at the problem and you will solve it. Where does innovation and inefficiencies come in to it?

  4. Simon B says:

    if you think the duration the GPO/BT/Openreach have managed to survive with frankly ancient copper/aluminium for the last mile this really is an investment for the longer term and the deployment of fibre really is providing a future proof technology as the demand for speed does inevitably increase. Where I live the potential for voice, data and video on the same link will benefit many who suffer from poor ADSL , little 4G and no choice but the Sky Monopoly for a wider TV choice.
    I assume the corporate investors are looking at this combination as a long term safe if unspectacular return.

    One question for those in the know, While distances and geography are an issue in rural areas I presume trying to install fibre in most cities is a real pain (time, cost, paperwork) if any kind of dig is required and it might actually be simpler in the sticks to deploy the fibre

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