Ding Ding.. Hull UK’s Full Fibre ISP KCOM Sold to Macquarie for £627m

kcom van with ladder on top

After a frenzied week of bidding The Takeover Panel has announced that Macquarie Infrastructure – MEIF 6 Fibre – had won the auction for Hull and East Riding’s (East Yorkshire, England) incumbent broadband ISP KCOM. The group put in a huge final bid of £627m to see off competition from rival Humber Bidco.

The winner won’t come as much of a surprise because MEIF 6 Fibre previously held the highest offer (here) before the auction even got started (here), although they spent much of last week trading small incremental bid increases with Humber Bidco, albeit while saving their biggest one for the last minute. A classic auction strategy, as any eBay user will know.

NOTE: The £627m bid equates to 120.3p in cash per KCOM ordinary share, which compares with Humber Bidco’s final offer of 113p.

KCOM has become somewhat of a hot property since completing its £85mLightstream” rollout during May 2019 (here), which made a 1Gbps capable Fibre-to-the-Premises (FTTP) broadband network available to around 96% of the operator’s addressable network area (200,000 premises). The remaining 4% have gained 75Mbps capable Fibre-to-the-Cabinet (FTTC) technology and a few tiny patches main unserved by either.

The winning bid is significantly above even some of the more optimistic valuations for KCOM and there will no doubt be some who question whether they’re worth that much, especially given their focus on a limited patch of East Yorkshire. However MEIF 6 Fibre has already signalled that they have big plans for the operator.

The group has previously pledged to expand KCOM’s “fibre network beyond the current footprint” and make it available via more third-party ISPs (they’ll need to come up with a better wholesale proposition for that to work), although exactly how big this expansion will be is not yet clear. Such a move may also push them into areas with more established competition, which could be harder to attack.

Leigh Harrison, head of Macquarie Infrastructure EMEA, said:

“As an experienced, long-term telecommunications investor, we are committed to supporting KCOM’s sustainable growth.

We look forward to partnering with management to increase broadband take-up in its core region and beyond, enhancing the quality of service delivery while giving local businesses and residents greater access to the opportunities that high-speed broadband can provide.”

All of this should be seen as reflecting the wider appetite for investment in full fibre ISPs across the United Kingdom, which seems likely to result in a fair bit of market consolidation further down the road. One advantage of FTTP though is that the asset holds quite a bit of value (often even if the ISP itself fails), which is particularly true when deployed into areas with limited pre-existing competition from fibre rivals.

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