Full Fibre UK AltNet ISP Zzoomm Sniffs Acquisition of Trooli
Network builder and UK ISP Zzoomm, which is being backed by Oaktree Capital and aims to cover 1 million premises with their full fibre broadband network by the end of 2025 (they’ve already covered 100,000), has reportedly joined the list of those interested in acquiring fellow network provider Trooli.
In case anybody has forgotten, Trooli was originally supported by an investment of €30m from the Connecting Europe Broadband Fund (Cube Infrastructure Managers) and £5m from NatWest. But this was given a boost in 2021 by a new £67.5m debt facility agreement via a consortium of commercial lenders, facilitated by the CEBF (here).
The operator has since been busy building their new Fibre-to-the-Premises (FTTP) network to serve a sizeable number of towns and villages in Derbyshire, Kent, East Sussex, Berkshire, Buckinghamshire, Cambridgeshire, Hampshire and Suffolk. The initial goal had been to reach 400,000 premises across around 300 towns and villages by Dec 2022, but the last figure we had was 275,000 passed in August 2022.
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However, Trooli will need more investment to continue their rollout, which is something that they’ve so far been unable to secure. Questions also surround how much take-up their network has been able to generate. In short, the operator has recently become the subject of intense speculation around the possibility of an equity sale, merger or takeover by a rival provider.
According to recent reports (here), Virgin Media (VMO2) is believed to be one of several parties with an interest in Trooli, which is partly because the FTTP network they’ve built largely exists in areas that don’t overlap. Sky News are today reporting that Zzoomm has also expressed an interest in bidding for the operator.
Apparently, Zzoomm has already made it through to the second round of an auction being conducted by bankers at Lazard. We suspect that an agreement will need to be made fairly soon, before Trooli runs into problems with its existing funding sources. But such a deal would require Oaktree Capital to make a substantial additional commitment, although it would also get them much closer to Zzoomm’s coverage target and potentially accelerate that.
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 X (Twitter), Mastodon, Facebook and Linkedin.
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Interesting what the thought process is behind that as they have built around some of the same areas in Berkshire
In this market, it may be increasingly hard to avoid some overbuild, so it’s a question of whether the whole is still worth it. Equally, if it ends up as an asset sale, then different parts of the network might go to different bidders. We simply don’t know yet.
Certainly true, but likely a very small %age of overall coverage so as mark says it could still make sense as a whole.
An important point to be made here is that the overlapping coverage is not worth £0, less probably, but even in overlapping areas;
-They will have connected customers in said area which are worth something and have a NPV.
..This will also increase their uptake rate and the higher uptake the lower the ongoing cost to service a customer (i.e 10% of 1000 prems is in some ways worse than 50% of 200). It is more efficient for one provider to run a single network than two providers to run independent networks if serving the same customers. If they are your only true competition (e.g only otherwise FTTC available) you have then purchased a local monopoly and at least in theory could put up prices in said overlap areas to a higher level than if you were operating in a competitive environment.
-Coverage may not be perfectly overlapping for example in a given village or town the network may go down a street they don’t.
-They may gain some extra diversity and/or additional capacity, access to different backhaul routes that will complement their existing network.
Rather one of the rising alts than the big and expensive top2
Big risk for Zzoomm. 18 months time i suspect they could also find themselves in some trouble
Zzoomm’s founder has previous experience at Gigaclear. Though there financial conditions seem to always be just getting by at Gigaclear.
Expect this to happen more and more until they’re all gobbled by one real Openreach alternative, much like the cable networks of the 90s and early 00s
It certainly will happen that way. But when you look at the cumulative profits and return on capital of Virgin Media and predecessors you end up with a number that is around nil, and I doubt that altnets (as businesses) will do any better. There’s a fundamental flaw in the very idea of private sector investment in infrastructure, which is that absent regulatory protections (eg for electricity or water assets) the useful asset life and the payback time is beyond the timescales that are required when using risk-based equity and debt. And you can’t alter those rates as they’re set by the range of other investment opportunities. This incidentally is why it is so difficult to justify new roads or railways, and why HS2 is built on a fictitious business case – if realistic numbers were used, it would be seen (regardless of where you stand on the other merits) as the financial black hole that it is.
If Trooli is having problems getting people to take up the service, why do ZZoomm think they will do any better? I don’t think Zzoomm is getting the amount of people they thought signing up to their service around herek, but saying that I don’t think openreach is getting a great deal of people taking fibre either Still only four houses from what I have seen have fibre in my road, two Openreach and two ZZOOMM.