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Hyperoptic Hunting GBP500m to Continue UK Full Fibre Rollout

Thursday, Feb 29th, 2024 (2:08 pm) - Score 3,920
Hyperoptic-UK-Engineer-at-Street-Cabinet-2022

City-focused ISP and network operator Hyperoptic, which has already extended their full fibre (FTTP / B) broadband network to cover “more than” 1.4 million UK homes in parts of 64 UK towns and cities, is reportedly attempting to raise up to £500m of additional capital in order to continue their network expansion.

The operator previously hoped to cover 2 million premises with their gigabit-capable broadband network by some point in 2024 (the original target was for the end of 2023). On top of that, they are also aiming to grow their customer base to total 500,000 in the near future (currently 300,000 on 5th October 2023).

NOTE: KKR acquired a majority (75%) equity stake in Hyperoptic during 2019 (here) and the operator, which is home to c. 2,000 staff, has so far secured over £600m in debt to fund growth.

However, Hyperoptic’s plans suffered a blow in mid-2023 after they announced a number of redundancies, while also appearing to suffer a slowdown in their build (here). Suffice to say that the provider, much like many other alternative networks in the current climate, is in need of fresh funding to keep their plans on track. Either that, or they could become a tempting consolidation target (CityFibre and nexfibre might show an interest).

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According to a report on Bloomberg, which we initially overlooked (credits to Ionide for the nudge), KKR is allegedly “sounding out investors for the fundraising” that could raise up to £400m to £500m. But the deliberations are still said to be at an early stage and the details are thus subject to change.

The difficulty is that raising additional investment during a period of high build costs and high interest rates is, as many other network operators have already discovered, rarely an easy task. In other words, we may have to wait for interest rates to fall a bit before a major funding raise becomes viable, which might not happen until next year. But much would depend upon the detail. In any case, neither KKR nor Hyperoptic want to comment.

One thing that might help the provider in this regard is that their fibre network has reached a greater level of maturity than many of their rivals. Hyperoptic’s most recent set of annual results, which run to the end of 2022, reported revenue of £78.7m (up from £65.1m) and a gross profit of £62.3m (up from £52.5m), although their Average Revenue Per User (ARPU) had fallen a tiny bit from £26.8 to £26.7. But the company also invested £175.4m to grow their fibre network in 2022 (up from £103.1m) and they’ve already raised their committed debt facility to £840m (excluding a £35m revolving credit facility).

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Mark-Jackson
By Mark Jackson
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 .
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Comments
18 Responses
  1. Avatar photo Phil says:

    Hyperoptic has been very very slow roll out not much

  2. Avatar photo RightSaidFred says:

    I don’t see how any of this is sustainable.

    They’re barely making enough gross profit to service the interest on the debt.

    It’s great that they’ve invested £175m in new fibre networks over a year, but how many new customers are they actually expected to obtain for that investment?

    If it isn’t enough to add enough profit to start making meaningful inroads into reducing that debt, then all they’ve done is build a network for someone else to buy on the cheap whilst simultaneously burning through their investors’ cash.

    At some point you’ve got to be taking on more paying customers than you’re adding new fibre networks. That point in time is a lot sooner for these altnets than most people probably think.

    1. Avatar photo Some Edinburgh Guy says:

      I feel like that time has arrived. Slowdowns in builds have arrived for most alt-nets, they’re not getting enough customers and its clear that a lot of places they’re rolling fibre networks into have either hit their peak customer cap, or are just about it [peak customer cap being that they won’t get any more customers because the customers they’ve not converted are not interested in their service].

      Openreach and nexfibre are probably happy with this though: it will give them free methods to expand their network while having done nothing at all beyond buying the fibre assets and re-jigging the end pieces to work with their network stack, or simply counting them as “trials” for future developments.

      Overall, i think this year is when we’re going to see a lot of alt-nets shutting up shop and being merged into other network. Whether thats Openreach, nexfibre/VM or CityFibre, the number of possible networks in the UK is probably going to start going down to more manageable levels.

    2. Avatar photo No name says:

      I can see it being nextfibre that gets most of them. For all their faults, they have the size and scale to ingest and get the networks ready for service quickly. CF, not so much.

      VM already did this with the Sky FTTP trial in Swadlincote and they’ve done it with Upp recently.

      The duopoly is nigh. If it’s good for the consumer or not, we’ll see.

    3. Avatar photo Big Dave says:

      @No name

      “The duopoly is nigh. If it’s good for the consumer or not, we’ll see”

      It’s a double edged sword. In terms of getting the lowest price maybe not so much, In terms of ease of switching it’s a lot easier to plug in a new router on changeover day than having to keep having new infrastructure installed.

    4. Avatar photo greggles says:

      VM will be doing acquisitions I think, notably these networks are in many VM HFC areas and VM have done practically no FTTP building in those FTTP areas.

      Grain and hyperoptic seem two clear acquisitions for VM.

  3. Avatar photo Lexx says:

    With openreach rolling out fibre all over the UK, alt nets are going to be having big issues with getting customers off openreach (BT it sky,BT,talktalk)

    even virgin is rolling out FTTPn (moving the cab to each property wall so each person gets a dedicated connection)

    1. Avatar photo Lee says:

      VM are rolling out XGSPON, not P2P fibre, not sure where you get that idea?

    2. Avatar photo greggles says:

      openreach are not doing all over the UK, they have very large gaps in many urban areas as an example.

      the altnets not having brand recognition are suffering, but I think as long as they get brought out they have probably achieved their end game.

  4. Avatar photo Sam says:

    Hyperoptic is not at 1.4million, not even close. Only now have they got to the 1 million mark

    Community Fibre is the altnet hitting 1.4 million homes

    1. Avatar photo Hype says:

      Where’s your source?

    2. Avatar photo Sam says:

      Thinkbroadband data. Plenty of articles on this website also point out that they are below 1m

    3. Avatar photo Tariq says:

      1.4 mill sounds right and if anything is higher – think broadband wouldnt have the complete data

    4. Avatar photo Alistair says:

      What is your source? Thinkbroadband is pretty accurate, sometimes just being a few months behind so a max lag of 5-10%, NOT FORTY PERCENT

      If you find the 400k homes missing there then email Andrew

  5. Avatar photo Mike Roe-Dickie says:

    Hyperoptic are an ISP that provide FTTP services to savvy consumers.

  6. Avatar photo Oggy says:

    Another altnet in trouble and begging for more money.

    It’s just a pity that nobody foresaw that anything like this would happen!

  7. Avatar photo Mark says:

    The differentiator with hyper optic is that they have largely focussed on MDUs and they specifically go after new builds.
    So, of then they are the only fibre operator in these buildings and will most likely remain so.
    But with the exception of a few hyper zones they have built, most of the buildings are served by expensive connections from Openreach.
    I actually think that £62mil profit from £78mil revenue is a great margin.

  8. Avatar photo Anonymose says:

    @Mark: “I actually think that £62mil profit from £78mil revenue is a great margin.”

    It is…until you factor in the debt they’re carrying!

    As someone commented earlier…”They’re barely making enough gross profit to service the interest on the debt.”

    £600m at maybe 8% interest plus some minimal capital repayment will reduce that £62m to £0 very quickly.

Comments are closed

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