Freedom Fibre Sniff Possible Deal for VXFIBER’s UK FTTP Network

Alternative network operator Freedom Fibre is reportedly exploring a possible acquisition of struggling provider VXFIBER, which alongside subsidiary and ISP LilaConnect has recently had to cut jobs (here) and pause its UK rollout of a new gigabit-capable Fibre-to-the-Premises (FTTP) broadband network.

At present Freedom Fibre’s full fibre network – backed by an investment of £84m from Equitix and a £16m Santander debt facility – covers “approximately” 95,000 premises passed (up from 40,000 in Nov 2022) and they have an initial goal of expanding to over 150,000 properties through 2023. After that the operator, supported by UK ISP TalkTalk, aims to eventually cover over 2 million premises in England and Wales.

By comparison, VXFIBER, which is owned by InfraBridge, has a number of deployments across the Staffordshire cities and towns of Stoke-on-Trent (here), Leek (here), Cannock and Penkridge (here), as well as the Essex town of Colchester (here), parts of London (via Prime Fibre), Haverhill in Suffolk (here), Crewe and Nantwich in Cheshire (here), and some projects in Bristol and Uttoxeter.

However, ISPreview recently revealed that VXFIBER’s operations in the UK had been hit by a spate of redundancies, with the company confirming that they would also be “pausing further deployment to focus on commercialising the fibre already laid.” Like many other players in this sector, the operator is believed to be under pressure from rising costs (build, leases etc.), competition from rivals (e.g. overbuild) and the related need to secure a viable level of consumer take-up to help satisfy investors.

According to Sky News, Freedom Fibre is now said to be one of several interested parties in VXFIBER’s business, and the operator has allegedly already held “initial talks” about doing a deal. Neither operator appears to have provided a comment to Sky, which is to be expected. At this stage it’s unclear whether Freedom Fibre are interested in the whole of VXFIBER’s network or only those bits nearest to their own (e.g. Stoke-on-Trent).

Often one of the most difficult obstacles in such negotiations is whether or not an agreement can be reached on network valuation, which is tricky because not all full fibre networks are built in the same way (with the same kit) and the buyer also has to consider the extra costs of integration. At the same time, investors will want to get the most value for what they’ve built, but that value deteriorates as more competitors overbuild the infrastructure.