Broadband ISP Zen Internet Preps Big UK Network Expansion

Rochdale-based broadband ISP and communications provider Zen Internet (since 1995) looks set to begin the next phase of their network expansion, which should help them to reach 80% of the UK. This reportedly comes after NatWest extended a £20m revolving credit facility to help fund the effort.

At present Zen Internet has unbundled 450 of BT’s exchanges (65% coverage), although the provider has previously talked about potentially reaching 987 exchanges by 2025. However Zen’s Founder & Chairman, Richard Tang, recently informed ISPreview.co.uk that the ISP’s immediate goal was to reach 700 exchanges (80% coverage) by the end of 2020 and this is the focus of today’s news.

The ability to install their own kit inside BT’s exchanges gives them a lot more flexibility and control over the services they can offer. In addition, this has also helped them to bring down the cost of their home broadband packages in order to more directly compete with the biggest providers.

Apparently the extra 250 exchanges needed to reach 700 will take about £10m from the new credit facility to complete and this will also be used to help refresh their core network, including an upgrade of their network capacity to 5 Terabytes (needed to help capitalise on the move to “ultrafast broadband“).

Richard Tang told ISPreview.co.uk:

“This investment will give us the big advantage of being able to compete on a level playing field with our biggest competitors. Without these new exchanges we just couldn’t achieve the price points to do that. It also gives us more control of our network so we can continue to build on our reputation for reliability and exceptional service. On top of this, it allows us build upon our already successful wholesale business.

Unbundling like this gives us benefits across both our broadband and Ethernet product portfolios. We sell significantly more on-net Ethernet circuits compared to off-net circuits due to the better pricing we are able to achieve.

In broadband, we charge the same price on-net [Zen’s unbundled network] and off-net [external supplier], and our on-net circuits cross-subsidise our off-net circuits. So the greater our on-net footprint, the better our commercial model will be as we scale up. Unbundling gives us choice too – we can choose to be an early adopter because we do not have to rely on a wholesale provider.”

Mike Malone, Director of Structured Finance at NatWest, said:

“We are delighted to be able to continue our support for such an exciting company. Zen has a well established track record and an ambitious growth strategy. We are pleased that we have been able to provide the financial support needed in order to deliver on its next phase of growth and support another exciting, high growth locally based business.”

Zen certainly seems to be going in the right direction and last year spoke of their desire to become a £100m business within 3 years, rising to £150m by 2023 and then £250m within 10 years. We won’t know how much progress they’re making toward that goal until the next set of annual accounts surface, although Zen’s turnover in 2017 was £71m, which is up from £63.9m in the previous year.

Richard Tang added:

“Our expansion plans therefore involve us going to around 700 fibre parent exchanges and installing metro, regional and national networks to enable both superfast and ultrafast connectivity for our customers. Based on what we know this will place us in the top five broadband networks in the UK.

Regarding our commercial strategy, our goal is to move from being a niche premium player to becoming a true challenger brand to the biggest names in our industry, whilst continuing to build upon our reputation for service quality and reliability. Our aim is to be a conscientious challenger – doing the right thing for our people, customers, and supplier relationships based on our people-first values.

My long-term dream goal is that one day the broadband “Big 4” will be known as the “Big 5”, with Zen being the fifth member of that group.”

The ISP currently employs 500 staff and is home to around 126,000 broadband customers. We recently interviewed Richard and are currently preparing the full article for publication in the near future, which covers various topics related to “full fibre” and broadband connectivity.

Zen was provided with financing advice by KPMG Debt Advisory (Nick Dodd, Meredith Casey, Neil Brown and Eddy Lanaghan).