Oxfordshire-based alternative broadband ISP Zzoomm, which recently revealed that their 2Gbps Fibre-to-the-Premises (FTTP) network had covered 200,000 premises (RFS) across 23 towns in England (here), has today reported their end of year results (Dec 2023) and confirmed that they’ll cease new building work from the end of this month.
The operator, which has thus far been fuelled by an equity investment of £100m from Oaktree Capital (here) and a £100m debt facility via an international banking consortium (here), has typically focused their roll-out on smaller towns in parts Berkshire, Oxfordshire, Herefordshire, Yorkshire, Staffordshire, Wiltshire and Cheshire.
However, much as we reported a few months ago, Zzoomm’s deployment recently suffered a slowdown and job cuts (here and here). At the time, the provider informed ISPreview that “new network construction is stopping”, although they didn’t give a precise date and added that some existing work would continue (mostly on a local case-by-case basis). Many other network operators have suffered similar issues, partly due to high interest rates and rising build costs.
In that sense the publication of their latest 2023 Year End Results doesn’t add much to what we already knew, but it does provide a useful update on their progress, while also confirming that the “capital raising market remains extremely tight in the UK and the cost of capital available remains too high to generate equity returns.” Accordingly, Zzoomm states that the “focus now is on commercialising its network towards profitability” and “construction of new network is being wound down and is expected to cease by the end of Q2 2024” (i.e. this month).
Just to be clear, the revised focus is said to be having “no impact on the operation of the existing network or the ability to deliver service to new or existing customers“. Zzoomm added that they would continue to invest in commercialisation activities in marketing, sales, customer service and field service functions in order to help rapidly grow their take-up.
The Group expects to have a total of circa 202,000 properties RFS (Ready for Service) by the time the build stops.
Results Highlights
Customer penetration rates accelerating across the network
Average take-up increased to 12% for year to March 2024 (March 2023: 7%)
Numerous geographies / towns now have over 30% market penetration (these are said to be now “profitable“)
Current rate of customer take-up accelerated to 1% per month (2023: 0.9%)
Properties ready for service and contracted customers rapidly growing, excluding large order book
End December 2023, circa 189,000 properties (Dec-22: 94,000) ready for service with circa 20,200 (Dec-22: 6,300 customers) contracted
End May 2024, over 200,000 properties (May-23: 140,000) ready for service and over 27,000 (May-23: 12,000) customers contracted
Revenue increased to £3.6m (2022: £1.2m) as recurring subscription revenue momentum builds
Operating loss £21.0m (2022: loss £12.3m) reflecting continued investment in growing the network and infrastructure
At the end of 2023 a total of £148.7m been spent on network build (2022: £95.3m).
At the end of the year, the Group cash balance was £2.9m (31 Dec 22: £18.3m).
Focus on commercialisation with current network construction completed by end of June 2024 – cost base materially reduced
The results also confirm that the number of employees supervising contractors and enabling the build has now dropped to zero, which compares with 233 at the last set of results. But Zzoomm does hold out some hope that “affordable capital” may become available again in the future, which they say “would enable the restart of new Full Fibre build.”
Matthew Hare, CEO of Zzoomm, said:
“Our focus has always been on delivering an exceptional service to happy customers. We are now concentrating on profitably commercialising our outstanding network and brand position, as our current build phase closes, by bringing our brilliant Full Fibre capabilities to many more homes and businesses.
We are well positioned to make acquisitions in fragmented and competitive markets as we are growing faster, have a more highly valued brand and network and stronger commercial proposition than many of our peers. An enlarged group, based around our established operational and effectiveness and technical infrastructure, would benefit from the economies of scale.
New customers are taking up our high value offer at a market leading rates across all geographies. Our high customer satisfaction scores continue to improve, and we are seeing minimal churn, those that are leaving being primarily house movers.
With ARPU continuing to increase, we are now moving towards profitability. Those towns with over 30% market penetration are largely profitable already.”
Customers who take their residential service typically pay from £29.95 per month for an unlimited 150Mbps (symmetric speed) package on a 12-month term with an included router, which goes up to £54.95 (normally £64.95) if you want their top 2Gbps tier.