UK altnet Zzoomm reportedly axes half of its workforce

Oxford-based FTTH provider Zzoomm has become the latest UK altnet to feel the pinch of inflation.

The Telegraph reported on Monday that the company has axed 300 employees, equal to 50% of its workforce. According to the paper, Zzoomm has decided to save money by outsourcing its fibre deployment. As such, the redundancies will affect its construction team, including engineers and related office roles.

The development shows how rising costs and interest rates are making life tough for smaller providers that have taken on debt to fund their network deployments.

Zzoomm launched in 2019 with a plan to cover smaller towns and cities with full fibre. It has been doing well at this, passing its 100,000th property in February, and signing up its 10,000th customer in March. It is one of a handful of altnets trying to compete with incumbent BT’s Openreach division, and Virgin Media O2, with carefully-targeted but aggressively-paced fibre rollouts.

This clamour was fuelled by the UK government’s ambition to see ‘Gigabit-capable’ networks reach as many households as possible, as quickly as possible, creating a situation upon which investors were keen to capitalise.

That worked well when inflation and interest rates were both lower, but the situation has changed quite dramatically over the last year or so.

Take CityFibre, for example. One of the UK’s larger altnets, it was acquired in 2018 for $750 million by a consortium led by Goldman Sachs. In June 2022 it raised nearly £5 billion – one of Europe’s largest ever fibre-related debt packages. It said at the time this would fully fund its network deployment, which ultimately aims to cover 8 million premises. Fast-forward to February this year though, and CEO Greg Mesch was forced to axe 400 staff as his company grapples with the rising cost of rolling out its network.

Another altnet, Trooli, launched in Kent in 2018 with the aim of deploying fibre to 1 million premises by 2024. To help it get there, it secured a £67.5 million debt package in August 2021. In April this year, Trooli was snapped up by France-based investment fund Vauban Infrastructure Partners, a sign that the market isn’t big enough to maintain so many independent providers.

As for Zzoomm, in September 2020 it sold equity worth £100 million to US-based asset manager Oaktree Capital Management. It followed that up in October 2021, raising £100 million of debt to help fund its ambition to connect 1 million premises by 2025. And now it has joined the growing list of altnets having to make adjustments in the face of spiralling costs.

By comparison, bigger players don’t seem to be feeling the pinch quite so much.

VMO2, backed by multinational giants Liberty Global and Telefónica, is said to be considering a bid for CityFibre worth £3 billion, as it pushes ahead with its aggressive fibre upgrade programme.

And on Tuesday, Openreach announced an extra 10 locations have been added to its FTTH rollout plan. It will mean a further 124,000 premises will fall within its network footprint.

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