{"id":38834,"date":"2024-07-26T11:00:06","date_gmt":"2024-07-26T10:00:06","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=38834"},"modified":"2024-07-26T13:47:05","modified_gmt":"2024-07-26T12:47:05","slug":"ceo-of-uk-broadband-isp-zzoomm-prep-fttp-growth-via-consolidation","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2024\/07\/ceo-of-uk-broadband-isp-zzoomm-prep-fttp-growth-via-consolidation.html","title":{"rendered":"CEO of UK Broadband ISP Zzoomm Prep FTTP Growth via Consolidation"},"content":{"rendered":"

The CEO of Oxfordshire-based alternative broadband provider Zzoomm<\/a>, Matthew Hare, has revealed that they’re still aspiring to cover 1 million UK premises with their 2Gbps FTTP<\/a> network (despite the recent move to stop new building work), but “if we can’t build it ourselves then … you have to buy it<\/em>” (growing through consolidation).<\/p>\n

Just to recap. Zzoomm<\/a> has so far extended their Fibre-to-the-Premises<\/strong> (FTTP<\/a>) network to cover 202,000 premises (RFS) – with 30,000 customers expected in August 2024 – across 23 towns in England (here<\/a>) and they originally aspired to cover 1 million premises across 85 UK towns by the end of 2025. The build has typically been focused on smaller towns in parts Berkshire, Oxfordshire, Herefordshire, Yorkshire, Staffordshire, Wiltshire and Cheshire.<\/p>\n

NOTE:<\/strong> The network operator is supported by a total of \u00a3224m in capital = \u00a3100m debt via banks (here<\/a>), \u00a312m from private investors (“big chunk<\/em>” of that comes from Matthew Hare) and \u00a3112m via Oaktree Capital (here<\/a>).<\/div>\n

However, the altnet’s roll-out was recently dealt a blow after they stopped new network construction in order to focus on growing customer take-up (here<\/a> and here<\/a>), which largely stemmed from the fact that the \u201ccapital raising market remains extremely tight in the UK and the cost of capital available remains too high to generate equity return<\/em>s.\u201d<\/p>\n

The situation is something that Matthew Hare has now touched on again as part of an illuminating new interview, which was conducted by Richard Tang<\/strong>, the venerable<\/span> CEO of retail ISP Zen Internet<\/a>. “Stopping the build is all about availability of capital, it’s not about availability of opportunity or aspiration … 1 million premises is still a good target to get to as a footprint, and probably even a bigger number, but if we can’t build it ourselves then we’ll have to find another way of getting there. The aspiration is absolutely still there<\/em>,” said Matthew Hare.<\/p>\n

Matthew goes on to make very clear that Zzoomm<\/a> is “really not a fan of overbuild and if you can’t build it yourself you have to buy it<\/em>“, before firmly indicating that they “absolutely are<\/em>” on the acquisition trail as a means of achieving their original coverage aspiration. But this would still be very challenging at their current level of funding, which may restrict the sort of scale they’re able to acquire via consolidation.<\/p>\n

Speaking of the overbuild challenge, Matthew noted that there’s “no way I thought there would be 40 or 50 operators building [full fibre] in the UK<\/em>” when he started Zzoomm in 2018. “At that point I think there were six or seven of us, including Gigaclear<\/a><\/em>,” he added. This helps to underline how competitive the market has become in a relatively short space of time, and the difficulty of adapting to that once plans and money have been committed.<\/p>\n

Just to underline this point, Matthew later notes that Zzoomm actually descoped about 265k properties from their plan to avoid overbuild with other networks (e.g. they pulled out of Skipton after spending \u00a370-\u00a380k to avoid a more costly risk). But overbuild is still a challenge, which sees “about half<\/em>” of their network competing directly with Openreach<\/a> (FTTP<\/a>), with another 10% coming from altnets and thus c.40% as Zzoomm-only areas.<\/p>\n

However, the situation, in terms of future funding sources, remains a challenge. “Right now the debt markets are still, bluntly, completely constipated … and we’re maybe a year away from seeing some more opportunity to raise debt in order to buy assets<\/em>,” said Matthew before adding that they need to go beyond 200k premises: “You need to have a big fibre footprint to have a good viable business that gets great returns to shareholders.<\/em>”<\/p>\n

The interview also briefly touches on market penetration, which reveals that they “want to be in the high 20% penetrations on average to start to get the returns that my shareholders want to see<\/em>” (they’re currently at an average of c.15% and growing). But they’re already at over 35% in their oldest towns and the cohorts they’ve been in the longest are now over 40%, so Zzoomm’s confidence in the future remains high.<\/p>\n

Finally, the interview touches on Ofcom<\/a>’s much delayed One Touch Switching<\/strong> (OTS) system, which aims to make it easier for consumers to switch broadband ISPs. “I think for OTS we’re in a good place, but I still am quite worried about the potential for bad actors to cause an awful lot of damage to the UK telecoms industry by abusing one touch switching<\/em>,” added Matthew without elaborating on the ‘bad actors’ remark (most likely a reference to SLAMMING – being switched without your consent).<\/p>\n

The full interview is well worth watching (see below) and, just to underline the current challenges with high interest rates, Matthew notes an example with how their debt repayments doubled from \u00a3450k\/month to \u00a3900k\/month. This helps to underline the challenges, particularly if the availability of capital remains constrained.<\/p>\n