Virgin Media O2 reportedly dropped out acquisition talks earlier this month
French investment fund Vauban Infrastructure Partners and Axione, which is back by Vauban, are in talks to acquire the UK altnet Trooli, according to the Financial Times.
Trooli raised £67.5 million in debt in 2021 from a consortium and has passed 200,000 homes mostly in the south east of England at an cost of only £170 per home passed. It plans to pass 2.1 million premises by 2026, carefully avoiding Virgin Media O2’s footprint and so compete by being the only all-fibre provider rather than through overbuilding.
Virgin Media O2 and its parent companies were potiential suitors for a time, but are believed to have backed away from the deal because of price and the “estimated cost of repair work required on the network” the FT article said.
Virgin Media O2 is now rumoured to be eyeing Cityfibre which has an estimated price tag of £3 billion.
Consolidation coming
Rising costs and interest rates are expected to drive a wave of consolidation among the 100+ altnets in the UK.
The problem has not been the build-out of fibre, but many altnets have struggled to convert premises passed by their networks into subscribers. The FTTH Council Europe’s recently published research into the adoption of FTTH, shines a light on complex reasons for this, but in the UK some of it comes down to short-sighted national planning and regulatory decisions (such as prolonging the life of FTTC and allowing it to be described as fibre, causing confused among consumers and difficulty in differentiating the services’ performance).
Regulatory decisions
Investors in UK altnets have also been spooked by regulator Ofcom waving through a first round of discounted prices (known as Equinox 1) to service providers by wholesale infrastrucutre provider Openreach despite protests that it was undermining their business model.
Equinox 2 is now under consideration by Ofcom, which decided to take a closer look after the proposals after some bullish comments by BT Group’s CEO, Philip Jansen.
Many altnets and their backers have also been caught somewhat by surprise at the speed at which BT has built out it full-fibre broadband infrastructure in the last couple of years. As recently as 2019, the UK was at the bottom of full-fibre penetration ranking in Europe and only just made it over the threshold of 1% penetration to be included.