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A new report has claimed that Abingdon-based broadband ISP Gigaclear, which has built a full fibre (FTTP) network across 612,000 premises in rural parts of England and is home to c.160,000 customers, have begun the process of hunting for a buyer as one of the preferred options for tackling their £1bn debt mountain.
The provider, which back in 2010 took on the huge challenge of trying to expand FTTP across rural areas using a commercial approach, currently holds an aspiration to extend their network coverage to 1 million premises. But like so many other network operators they’ve more recently had to scale-back their build and cut jobs, due to the pressures from high interest rates, rising build costs and a highly competitive environment (here and here).
Gigaclear’s main focus today is on delivering their publicly subsidised Project Gigabit contracts (i.e. “ultra rural areas“) for the government, while also trying to boost customer take-up through a stronger focus on commercialisation of the network they’ve already built. But at the same time they’ve still got a huge debt pile to tackle and efforts to raise fresh investment have yet to bear much fruit.
Suffice to say that there was nothing particularly surprising about the FT‘s (paywall) latest report, which claims that the provider has launched a sale process and this week started sending out “teaser documents” to potential buyers. Failing that, Gigaclear may have to consider writing down its debt (painful for creditors like NatWest, Lloyds and the National Wealth Fund), a debt-for-equity swap or seek a further cash injection from investors.
One thing to keep in mind here is that, despite Gigaclear only having covered 612,000 premises, the operator’s strong rural focus means that their physical network size is actually, geographically speaking, quite large and most of that exists outside of busy urban areas. But New Street Research is said to have estimated that Gigaclear could fetch between £500m and £700m.
The hope is that the provider will be able to avoid a restructuring process that results in them doing the first major write-down of debt in the alternative network (altnet) sector, which could fire the starting pistol on similar outcomes elsewhere.
A spokesperson for Gigaclear said:
“Our existing stakeholders remain supportive of the business, and we continue to work constructively with them to explore a range of options that support the long-term success of Gigaclear and deliver the best outcome for all parties.”
However, potential candidates for a consolidation agreement, such as CityFibre, may well still seek a reduction in the altnet’s debt levels before doing a deal. Meanwhile, Gigaclear insists they’re continuing to deliver “strong operational performance” and are “delivering on all key financial metrics”.
On the surface, CityFibre’s urban focus should be a good complement for Gigaclear’s more rural centric network, but there are some other potential caveats to consider. The rural provider’s network infrastructure might well require some expensive upgrades to match CityFibre’s latest XGS-PON network, and Gigaclear’s standard pricing (after discounts) tends to be much more expensive than CityFibre’s equivalent plans.
None of this should overlook the fact that Gigaclear has still managed to deliver an impressive full fibre network in some of the country’s most challenging rural areas. So, whatever the future holds, this will continue to exist and has had a hugely positive impact on many of the communities served.