London Full Fibre ISP G.Network Denies Warning it May Collapse

London-focused UK gigabit-broadband ISP G.Network, which is currently investing around £1bn to deploy a new Fibre-to-the-Premises (FTTP) network across the city, has said a recent newspaper report (Sunday Times) that alleged the company had recently warned of the risk it “could go under” are “simply not true“

The provider, which reports to have already covered 400,000 premises across London (up from 300k in Jan 2022) with their FTTP network, holds a long-term aim of reaching 1.3 million premises by around the end of 2026. Most of their build is currently taking place across the Boroughs of Westminster, Camden, Kensington and Chelsea, Hammersmith and Fulham, Islington, Hackney and other Inner London boroughs.

However, over the weekend the Sunday Times (paywall) alleged that the operator had recently “warned of the risk that it could go under” and was “is in talks with its banks about raising further capital,” which the paper then used as an example to highlight why Ofcom and the Government are currently reported to be developing a rescue plan for alternative networks (AltNets) that might fold.

The idea of creating contingency plans for AltNets (and their customers) that get into trouble is nothing new (here) and is believed to reflect two approaches – a revised Supplier of Last Resort (SLR) style process to help migrate customers away to another network and the possibility of a rescue scheme (“special administration“) – similar to those deployed in the energy sector.

The rescue scheme may involve using some public funding to help cover the costs of a large failure (i.e. costs that are too big to pass on to a potential buyer of a troubled network), but none of this has been finalised yet and some of it could be controversial.

Nevertheless, it was a surprise to see the comment about G.Network, given how they’re still in the early phase of build and have already managed to attract a significant level of investment. The ISP has been quick to deny the newspaper’s report.

A G.Network Spokesperson told ISPreview.co.uk:

“The claims in the Sunday Times that G.Network warned that it “could go under” are simply not true. G.Network filed its statutory accounts this month on a ‘going concern’ basis.

G.Network continues to grow steadily amid healthy demand and is backed by strong and extremely supportive long-term shareholders.”

The company’s latest annual accounts to 31st March 2022, which are indeed filed on a ‘going concern’ basis, noted that their turnover for the year was £4.328m (up from £3.182m) and their operating loss had hit £37.4m (up from £22.8m) – not unusual given the focus on spending big to build a new network. The payback period for such builds can be very long, up to c. 10-15 years, thus investors tend to understand that building a new network and generating take-up takes time.

The company’s accounts also reported that it had ended 2021 with a total of 340,000 premises passed and 8,664 connected customers, which is up from 180,000 premises and 3,477 customers in the year before (roughly double). The company’s average group headcount is now 645 (up from 263). Just as comparative example, Netomnia’s young FTTP network attracted around 10,000 customers for 130,000 premises passed in June 2022 (here), while older altnets like Hyperoptic tend to have much higher take-up.

As we’ve said many times before, the UK has become home to a mass of new altnet providers (100+), many of which are backed by many millions – and in some cases even billions – of pounds in private investment. Quite a few of these also hold major plans to expand gigabit-capable Fibre-to-the-Premises (FTTP) based broadband ISP networks across the country (Summary of UK Full Fibre Builds).

Speaking more generally, the market is unlikely to be able to support all of those players going forward, particularly in areas where there’s a lot of overbuild between several operators. Dense urban areas might be able to support up to 4-5 gigabit players, but this model becomes increasingly strained the further out you go due to high build costs and sparse populations (i.e into smaller towns and rural areas, where state aid support is often needed but competition is less).

Suffice to say, a growing wave of consolidation is widely expected, since not all of those altnets will be able to generate the take-up they need to convince investors to keep the money taps flowing. The challenge then becomes valuing such networks, particularly in areas where there may already be lots of competitive infrastructure (i.e. this could diminish the value of the fibre in the ground, which is normally a key asset with high value).

The fact that the Government and Ofcom are looking at how they can best support the different outcomes from all this is a prudent one. But it should be remembered that most networks are still in the early ramping-up phase of build, and we continue to see plenty of new funding announcements, which indicates a high tolerance for the risks, at least for now.

The consolidation that we have seen thus far has been at the smaller end of the scale and of the largely un-disruptive and more tactical variety. For example, CityFibre acquired FibreNation from TalkTalk (here), Swish Fibre gobbled up People’s Fibre (here), 4th Utility consumed Vision Fibre Media (here) and CommunityFibre acquired Box Broadband (here).

More consolidation will no doubt follow in the next few years as investors gradually put more of a microscope on progress (take-up and build rate), but over time some networks will definitely start to find it harder to secure a buyer than others. However, right now, having fibre in the ground still holds a lot of value.