IQ Fiber's network rollout may be costing more than expected

Florida-based fibre builder IQ Fiber has announced a new $150 million cash injection from its biggest shareholder SDC Capital Partners to fund a network rollout that seems to be costing more than it had expected.

Naturally, the firm is pitching the receipt of follow-on equity funding in a positive light, talking up its plans to use the cash to get further with the first phase of its network deployment, through which it aims to reach 60,000 homes in the north east of the state by an unspecified date.

IQ Fiber insists it is “on track” to hit that target, but did not state whether or not the additional funding will be enough for the whole build.

However, when it named SDC Capital Partners as its majority shareholder in September 2021, a month after it was formally established, IQ Fiber said the “significant equity funding” that resulted from the deal – we don’t have an actual figure – would enable it to complete that first phase of 60,000 homes.

Whether or not the companies in question had foreseen the need for follow-on funding, the tone of the latest release and the lack of certainty on how much of the network it will fund suggests that the rollout is proving somewhat more costly than was first envisaged. That’s not altogether surprising, given the current macro-economic situation; rising costs will prove an issue to all fibre builders.

Nonetheless, the company is pretty upbeat.

“We are excited to continue our partnership with SDC to offer a new choice to residents across Northeast Florida,” said Ted Schremp, founder and CEO of IQ Fiber. “While this area has experienced significant growth over the last few years, residents continue to be underserved by incumbent providers,” he said, going on to paint his company as the answer to all their woes.

Meanwhile, the company holding the purse strings provided a canned comment that serves to highlight why investors are still flocking to fibre, particularly in the US.

“This additional equity commitment is a reflection of IQ Fiber’s success and our confidence in the significant growth potential ahead,” said Clinton Karcher, partner at SDC Capital Partners. “We’re excited about the growth opportunity in Northeast Florida and look forward to continued partnership with the IQ Fiber team.”

The US fibre market is particularly hot at the moment, with myriad altnets springing up to invest in networks, often on a fairly small scale, relative to the size of the country, while others are bulking up through M&A.

On that last point, the latest example comes in the form of Archtop Fiber, a New York-based fibre builder that has been declaring its readiness to start rolling out its network for the past couple of months.

But rather than sharing the news that it has broken ground – indications are that it hasn’t, yet – Archtop Fiber announced the acquisition of Warwick Valley Telephone Co, a long-established phone company also based in New York, for an undisclosed sum. Its plan is to upgrade Warwick Valley’s network to full fibre, it said. Presuming the deal receives the required regulatory approvals, it expects it to close in late 2023.

Interestingly, the Warwick Valley Telephone deal is the latest from Archtop Fiber, which picked up Hancock Telephone Company back in January and GTel in November last year, both of which already have fibre in the ground. So it appears the firm is looking to buy itself some scale, as well as building out its own network.

It’s a company worth keeping an eye on as the altnet fibre market in the US continues to expand.

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