Starry's troubles continue as it files for Chapter 11

Starry has filed for Chapter 11 bankruptcy protection in a move it hopes will enable it to continue offering home Internet services in major US markets.

The fixed wireless access provider has had a difficult time of it of late, announcing its decision to pull out of one of its markets – Columbus, Ohio – and lay off staff just last month. That move came on the back of a difficult 2022, when it defaulted on the opportunity to pick up government funding and found itself the subject of endless speculation on its financial position.

Clearly all the debate from last year was not misplaced. And yet, its decision to go Chapter 11 comes as the FWA market in the US is starting to show some promise, with telecoms big guns T-Mobile US and Verizon backing the technology, which perhaps suggests there is hope for Starry yet.

The company says it has entered into a Restructuring Support Agreement (RSA) with lenders that should significantly reduce its debt and optimise its capital structure. It has filed various motions with the US Bankruptcy Court for the District of Delaware, including one for approval of a $43 million debtor-in-possession (DIP) financing facility to give it the liquidity to continue operations.

“Over the last several months, we’ve taken steps to conserve capital and reduce costs in order to put Starry in the best position to explore various financing paths for the company,” said company CEO Chet Kanojia. “With the support of our lenders, we feel confident in our ability to successfully exit this process as a stronger company, well-positioned to continue delivering an affordable, high-quality broadband experience to our customers…We have a strong and experienced team in place and look forward to moving through this process quickly so that we can continue expanding essential broadband access and #HappyInterneting to more communities across the country.”

Expansion is something that didn’t come as easily to Starry as it once hoped. The company officially launched in early 2016 with the lofty aim of building out a mmWave-based fixed wireless Internet service nationwide. However, seven years on and its current footprint of Boston, New York City, Los Angeles, Denver and Washington DC has proved to be the extent of its kingdom, aside from a fairly short-lived foray into Ohio.

Starry launched in Columbus in 2021, but pulled the plug at the end of January, citing the need to focus investment and resources on its first five markets, and the broader macroeconomic context.

That decision came after Starry backed away from the FCC’s Rural Digital Opportunity Fund (RDOF). Bidding as Connect Everyone, the firm had bids accepted for funding totalling $268.9 million to roll out infrastructure in over 100,000 locations across nine states. But when push came to shove, it couldn’t make the opportunity stack up and, according to FCC documents, defaulted on the process in the autumn.

Given all of the above, Kanojia’s insistence that the firm will exit Chapter 11 and crack on with expansion seems optimistic at best. That said, there is an ongoing uptick in FWA in the US at present, so it’s not the worst time to be a wireless Internet provider.

Indeed, T-Mobile in particular is pushing 5G-based FWA as a credible wired broadband alternative and late last year shared figures that suggest mobile operators like itself and rival Verizon are now responsible for a significant proportion of broadband customer additions. The pair together will have 11 million-13 million FWA customers by the end of 2025, it predicted.

They are, of course, much bigger outfits than Starry, with significantly larger coverage areas. Starry’s third-quarter results announcement showed a company record 10,347 net additions in customer relationships, taking its total to 91,297 at the end of September, an increase of 66% year-on-year.

It’s a small provider, but it is growing. And that must account for something as it restructures its finances.

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