Zzoomm secures £100 million for market town broadband

Zzoomm has sold an equity stake worth £100 million to Oaktree Capital Management to fund the next phase of its UK full fibre broadband rollout.

The bafflingly-named UK altnet, which is currently nearing the end of its first network deployment in Henley-on-Thames, said the financing will enable it to push on with the rollout elsewhere in the UK.

“We are targeting market towns that are currently stuck with the pedestrian speeds delivered over ancient copper cables. This funding from Oaktree will enable us to bring our transformational services to many more homes and businesses,” said Zzoomm founder and chief executive – and UK fibre industry veteran – Matthew Hare.

Zzoom has not named any of the locations in which it plans to deploy fibre next, but at the end of last year said it has as many as 240 towns on its target list.

If you were feeling cynical, you could accuse Zzoomm of cherry-picking. Market towns tend to be fairly salubrious, with residents more likely to shell out for fibre broadband. But according to Hare, market town rollouts come with certain challenges, which is perhaps why they are underserved by the bigger players.

A combination of old, listed buildings and cobbled streets with a mishmash of underground ducts make it difficult – and presumably costly – to lay fibre in small market towns, Hare told the FTrecently.

Nonetheless, the funds clearly see market town fibre as a good bet. Oaktree’s interest in Zzoomm provides further evidence, if any were needed, of the attractiveness of infrastructure to investors. It comes just a couple of months after London-based fibre altnet Community Fibre announced a £400 million funding injection from private equity firm Warburg Pincus and investment group DTCP, for example, and there have been several other similar announcements.

“We look forward to leveraging our operating expertise and experience with growth platforms to support the team as they deliver on their twin passions for providing great quality customer service and building a valuable infrastructure-backed business,” said Oaktree managing director Pablo Velez. As the FT pointed out, the deal marks one of Oaktree’s first direct investments in the telecoms space, but there is a suggestion it might not be the last, with Canadian outfit Brookfield Asset Management – which has numerous investments in towers, data centres and smaller operators – having taken a majority stake in the firm last year.

There are now fibre builders aplenty in the UK, many of whom are tackling towns, cities and small community, as the country works towards the government’s goal of Gigabit-capable broadband everywhere by 2025.

The likes of Openreach, CityFibre, Hyperoptic and Virgin “will crack Gigabit delivery for the urban and suburban areas of the UK. I’m really not worried about that,” said Openreach CEO Clive Selley at Connected Britain last week, during which he and others in the industry urged government to “get on with it” with regard to funding for rural broadband rollout.

With so many players targeting potentially lucrative locations like small and medium-sized towns, including market towns, there’s little wonder the Openreach boss is not concerned.