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Hull ISP KCOM Agree £504m Cash Takeover by Infrastructure Investor

Wednesday, April 24th, 2019 (5:00 pm) - Score 2,879
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The incumbent telecoms and broadband provider for Hull in East Yorkshire, KCOM, has provisionally accepted a cash offer of £504m for its business from Humber Bidco, which is a subsidiary of pension fund Universities Superannuation Scheme Ltd (USS) that has a track record of investing in UK infrastructure.

Under the proposal USS will seek to gobble KCOM for 97p per share (a 34% premium on KCOM’s closing price at the end of yesterday’s trade) and this is conditional on at least 75% of shareholders giving their approval, as well as the usual regulatory clearance. KCOM’s board has already recommended that they accept the offer.

The move comes just ahead of KCOM announcing the official completion of their £85 millionLightstream” deployment, which has expanded their 1Gbps capable Fibre-to-the-Premises (FTTP) based ultrafast broadband network to cover 96% of their addressable network area (200,000 premises) by March 2019; the remaining 4% will gain 75Mbps capable Fibre-to-the-Cabinet (FTTC / VDSL2).

The move would also appear to put an end to any notion of cable operator Virgin Media gobbling up KCOM (here), which always seemed rather improbable given the different regulatory positions of both operators in the UK market.

Patrick De Smedt, Interim Non-executive Chairman of KCOM, said:

“The Board believes that USSL’s offer for KCOM provides, on completion, both meaningful, guaranteed cash returns for shareholders as well as a strong, supportive partner in our endeavours to take the business forward to new successes. The Board believes that the offer of 97p per share represents a compelling opportunity for shareholders to realise an attractive cash value in respect of their shares and recognises the quality of KCOM’s businesses and the strength of their future prospects. For all these reasons, the Board unanimously recommends that shareholders accept the offer.”

Mike Powell, Head of the Private Markets Group at USSIM, said:

“We believe that KCOM is a high-quality business that is well-placed to grow and thrive under private ownership and that is why we have made this compelling offer to shareholders at an attractive premium. With the right capital support and assistance, we believe that KCOM’s management will be able to enhance the quality of its offering, delivering benefits for customers as well as sustainable, long-term returns. USSL’s track record as a long-term and supportive shareholder with extensive experience in regulated sectors makes us an ideal partner for KCOM.”

The announcement, which states that KCOM provides voice and internet-based services to 140,000 consumers and businesses in the region, notes that if all goes to plan then the acquisition should complete by around the middle of 2019. Naturally shares in KCOM have surged to 97p on the back of today’s announcement.

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Mark Jackson
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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13 Responses
  1. Avatar NE555

    “KCOM provides voice and internet-based services to 140,000 consumers and businesses in the region”, but the addressable area is 200,000 premises, over which KCOM has a de-facto monopoly. Does that mean that 30% of properties have no phone or broadband at all?

    • No, it means there are alternative wireless and fixed line networks, as well as different property types that may not be served in the usual way. KCOM may dominate the market but they aren’t the only choice across the whole of their network area.

  2. Avatar 125us

    Yeah, most new households that form have no fixed line comms at all and rely on mobiles. The proportion is even higher in towns with a big student population.

  3. Avatar Neil

    Will this put an end to the monopoly and let other providers in to the area and give the region a more competitive pricing after the years of high KCom prices

    • Avatar A_Builder

      @Neil

      The prices may be a bit higher but they have at least invested in a very high quality FTTP network.

      Personally I would prefer to pay a tiny bit more and get that level of investment.

      It was good that they did as it, at least in part, discredited the BT/OR fallacy on FTTP investability.

      Now the investment has been made the new owners can take a view on price structure.

    • Avatar Joe

      Err this deal does nothing this respect. Its an ownership change

    • Avatar 125us

      KCOM were in a different position to BT. They used a smaller gauge of copper in their last mile network which meant they ran out of road on xDSL very quickly, so a move to FTTP was the only viable option.

  4. Avatar A_Builder

    @Joe

    New owners can adapt to new commercial models.

    There will be a reason why the new owners see long term value.

    • Avatar Joe

      Not sure why the new owners would give up a monopoly unless forced. Not saying its not a good buy. But while expansion looks good why help out others the OP original point.

  5. Avatar Colin Achmed

    Not good deal. Long term shares will sky.I will vote No. Red hot takeovers in this area.

  6. Avatar Rob

    Are KCOM like Virgin who have their own network? Aren’t they any other fixed line providers in that area?

    • Avatar 125us

      A long, long time ago telephone services were run by a mix of local councils and private businesses. They got nationalised into the GPO apart from in Hull, where the council run service continued independently.

      Ownership of the national infrastructure and the Hull infrastructure has changed over the years, but essentially KCOM do what BT does in the rest of the country and they’re subject to the same types of regulation as BT is.

  7. Avatar MrBlah

    I doubt this will do anything to lower the price or end the monopoly.

    The fact the company purchasing KCOM also owns a brand of motorway service stations speaks volumes to me…

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