Carillion Fall – Fears for Openreach and Gigaclear Broadband Contracts UPDATE4

Major UK construction firm Carillion, which alongside partner telent holds a number of huge engineering and fibre broadband delivery contracts with operators’ like Openreach (BT) and Gigaclear in the United Kingdom, has this morning begun the process of entering “compulsory liquidation“.

The company, which employs around 20,000 people in the UK (43,000 if you include overseas) and also holds billions of pounds worth of contracts with the Government (e.g. the HS2 high speed train project), has been battling for much of the past year to find a solution for its financial problems (£1.5bn of debt, including a £590m pension deficit).

The combination of loss making contracts and a nasty pension deficit has gradually become a noose around the company’s neck, although Carillion had hoped to find some sort of a rescue from either the banks or the Government (they needed £300m of short-term funding). However, using public money to prop up a failing private company can be a risky business, but then so too is allowing that company to fail and endanger major projects.

In the end Carillion has not been able to secure a rescue deal, which could have consequences for a number of major broadband network and ISP delivery contracts.

Philip Green, Chairman of Carillion, said:

“This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.

Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future and the board is very grateful for the huge efforts made by Keith Cochrane, our executive team and many others who have worked tirelessly over this period.

In recent days however we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.

We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.

Further to the announcement made on 12 January 2018, Carillion continued to engage with its key financial and other stakeholders, including Her Majesty’s Government, over the course of the weekend regarding options to reduce debt and strengthen the group’s balance sheet.

As part of this engagement, Carillion also asked those stakeholders for limited short term financial support, to enable it to continue to trade whilst longer term engagement continued.

Despite considerable efforts, those discussions have not been successful, and the board of Carillion has therefore concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect.”

A little over a year ago the Carillion telent joint venture (60:40) announced another 3 year initial extension to their existing framework agreement with Openreach (BT), which would run until the end of 2021 (here). The deal was estimated to be worth around £1.5bn and ensured that Carillion telent would remain the operator’s main delivery partner for the management, maintenance and upgrading of their UK “fibre broadband” (FTTC / FTTP / G.fast etc.) network.

On top of that the same joint venture has only very recently signed a £200m contract with Gigaclear (here) to help the ISP roll-out their Fibre-to-the-Premises (FTTP) broadband network to more than 80,000 premises in rural South West England (e.g. Devon and Somerset), which has already started to deploy. Sadly today’s news would appear to cast a long shadow over the above contract, although Gigaclear isn’t worried.

Matthew Hare, Gigaclear CEO, told ISPreview.co.uk:

“It is very sad news that Carillion has gone into compulsory liquidation. Whilst this may have a minor impact on delivery schedules, Carillion telent is a separate business holding its own funds and bank accounts. Therefore, the contract with Gigaclear to deliver the build for full fibre broadband to the South West region still stands.

We are committed to delivering ultrafast broadband to Devon and Somerset, and already work with alternative partners in the area should the need to relook at capacity and resource arise. We will ensure any disruption to both our potential customers and suppliers is minimised. Our priority remains to connect this area to future proofed, full fibre broadband.”

Meanwhile Openreach is already believed to have conducted a “forensic investigation” of their deal (here) and the hope is that responsibility for the delivery of their contract could now be taken on, in entirety, by telent. Back in July 2017 a spokesperson for Openreach told ISPreview.co.uk that they had “every confidence that our partnership will continue to deliver strong outcomes for our customers and the UK“.

A Spokesperson for Openreach told ISPreview.co.uk:

“We note the reports about our work with Carillion telent (Ct).

The Ct joint venture is one of seven major partners providing similar services to Openreach across Britain and we have robust processes in place to monitor and manage all of our supplier risk.

We have conducted a thorough legal and financial assessment of the JV, and we’re confident in its ongoing viability without Openreach incurring any extra cost or liability.

We’ll continue to work closely with telent to avoid disruption, but we have every confidence that there will be no impact on our national network services and plans.”

Hopefully telent has enough resources to take on all of the responsibility for Openreach’s contract and it’s a similar story for the Gigaclear deal, as well as any others.

UPDATE 9:56am

Added a comment from Gigaclear above.

UPDATE 3:55pm

After a bit of a wait Openreach has now issued their statement, which is added above.

UPDATE 4:27pm

Finally we have a statement from the Carillion telent Joint Venture (CtJV). Mark Plato, CEO of telent, told ISPreview.co.uk, “Given our technical know-how, proven experience and financial strength, we will continue to successfully operate the CtJV activity. We have initiated implementation of our contingency plans this morning to ensure a smooth transition and are maintaining open communications with customers, workers and subcontractors.”

Carillion telent Joint Venture Statement

Following the news this morning of the liquidation of Carillion, telent would like to reassure the customers, workers and sub-contractors of the Carillion telent Joint Venture (CtJV) that the CtJV remains open for business and there will be continuity of delivery to its customers.

Telecoms infrastructure is telent’s core business and it has been involved with providing services to BT to maintain and develop their network for over 20 years.

The CtJV was established with Carillion in 2009, with a legal structure that gives telent the right to step into 100 percent of the Joint Venture in the event of insolvency, enabling the Ct JV to continue to operate, providing continuity and business as normal to its customers, workers and subcontractors.

Existing contracts will be honoured and continue to run as normal, including the two biggest contracts with Openreach and Gigaclear. All workers involved in the joint venture not currently employed by telent will transfer to telent, securing all jobs and delivery of the service. Subcontractors to the CtJV will continue to operate under their existing arrangements.

UPDATE 16th Jan 2018 – 7:05am

A spokesperson for the Government’s Department for Digital, Culture, Media and Sport (DCMS), which oversees the state aid supported Broadband Delivery UK programme, said: “We have been advised by contractors that any impact on the BDUK rollout of superfast broadband is likely to be minimal.”