Hyperoptic Aim Gigabit Broadband at 2 Million UK Homes by 2023

City-focused broadband ISP Hyperoptic, which is backed by global investment firm KKR, has today confirmed that their alternative “full fibre” (FTTP/B) network has now covered over 750,000 UK premises. The operator has also set a new target of covering 2 million homes by the end of 2023.

The provider – one of the country’s oldest and most respected pioneers of alternative full fibre networks – first sprang into life in late 2011 with a plan to connect large residential (MDU) and office buildings in London to one of the UK’s first ever gigabit speed broadband services (they’ve since grown to tackle new build housing too). By 2015 their network had reached 100,000 premises, before hitting 400,000 in 2019, and they’ve since built across parts of 57 towns and cities.

In terms of funding and targets. Hyperoptic secured a key £250m debt raise in 2018 (here), which was soon followed by a major £500m deal with the Mubadala Investment Company (here). As part of that, the operator also set a target to cover 2 million UK homes by 2021 and 5 million by 2024. In 2019 this was followed by the news that KKR had acquired a majority stake in the provider (here).

However, progress to date has not been as rapid as Hyperoptic would have liked. Today’s coverage figure of 750,000 homes and businesses – the first official data we’ve had since 2019 – is significantly less than the 2 million previously envisaged. But we’ll come back to this later.

Nevertheless, the provider has now set a new goal of passing 2 million homes by the end of 2023, with a take-up rate of “at least 30%“, which suggests that they intend to significantly ramp-up their current build – deploying to more premises in the space of just 22 months than they’ve done in the whole of the last decade. The good news is that Hyperoptic has maturity of presence, good leadership, funding and a proven customer base on its side.

Dana Tobak, CEO of Hyperoptic, said:

“The full fibre market is reaching a point of scale in its rollout, as the market collectively hits 28% coverage across the UK. As our industry grows, network operators need to show that their investment is sustainable and is delivering a service that customers are willing to pay for. For Hyperoptic, that means our growth is aligned to a dual focus; investing capital smartly to give the best return for both our customers and our business model.

With our revenues now reaching over eight times that of CommunityFibre [£3.77m] and G.Networks [£2.63m] combined, as well as our customer base establishing us as the UK’s largest exclusively full fibre Internet Service Provider, we are confident that we have developed a strong, resilient business model for long term sustainable growth.

Our plan is to continue scaling whilst delivering a phenomenal customer experience and, crucially, ensuring we maintain our strong customer take-up rates. To drive that, we are also setting the twin goals of our network passing two million homes by the end of 2023, whilst also maintaining a penetration rate of at least 30% where our network is over two years old.”

Vincent Policard, Partner and Co-Head of European Infrastructure at KKR, said:

“We have a strong track record of investing behind exciting digital telecommunications infrastructure companies. Hyperoptic is a rising star in UK telecoms, as it continues to deploy capital and network investment in a smart way, staying focused on connecting customers that need and take the service.”

On the thorny subject of their previous coverage target, Dana separately acknowledged to ISPreview.co.uk that they set “some pretty lofty goals in our early days … Since then we have learnt an incredible amount about scaling our build method, adapted our build model to ensure we continue to deliver value to our customers and shareholders alike, all whilst navigating external factors like the pandemic.”

The fact that today’s market is also chocked full of rival operators building FTTP into the same space – most of these didn’t even exist in 2019 (when the previous target was set) – will no doubt also be playing a role in their build progress. The acquisition by KKR similarly seemed to trigger some internal restructuring, which might have had an impact.

Meanwhile, the reference above to “maintaining a penetration rate of at least 30% where our network is over two years old” reflects how today’s announcement confirmed that Hyperoptic is home to over 230,000 customers, which equates to a take-up of 30.67%. This is a good figure for an operator that builds in aggressively competitive urban areas, where established players like Openreach (BT) and Virgin Media also swim.

Dana said:

“We set ourselves some pretty lofty goals in our early days. Since then we have learnt an incredible amount about scaling our build method, adapted our build model to ensure we continue to deliver value to our customers and shareholders alike, all whilst navigating external factors like the pandemic.

That approach has enabled us to become the UK’s largest exclusively full fibre ISP and the largest UK alt-net by customer base. It is also why we are updating our targets to include a take up element. As the alt-net market scales, it is going to become imperative for networks to show that the capital they are securing is being invested in infrastructure that is meeting a genuine need.”

The mention of CommunityFibre (435,000 premises passed) and G.Network (300,000 premises passed) above, which both predominantly focus on the London area and play in some of the same waters, could also be said to indicate that Hyperoptic are being particularly mindful of those they perceive as being some of their most direct competitors.

However, they should probably have included CityFibre (1 million premises passed), which recently reported revenues of £26.7m (up from £21.8m in 2019) – albeit reflecting the fact that CF’s FTTP rollout only started in late 2018. Indeed, all three of the above FTTP builds are much younger than Hyperoptic’s. There are many other AltNets too, but most of those are still only in the very earliest phases of build and would not be comparable.

Suffice to say, while Hyperoptic may have missed their original coverage targets, they remain one of the market’s highest rated ISPs and retain a seemingly much stronger and more established base than most of their rivals in the alternative network space. In other words, their foundations are all in the right place. Now they just need to show they can deliver on the new target.

Customers of the service typically pay from £25 per month for their unlimited 50Mbps (5Mbps) upload package on a 24-month contract term (currently discounted to £20), which rises to £60 per month for their top symmetric speed 900Mbps plan with free activation (currently discounted to £40 with 3 months of free service). You also get an included router, although their slower packages also attract a £29 one-off activation fee.