Infrastructure funds in talks to acquire UK ‘altnet’ Trooli

Two infrastructure funds are nearing a deal to buy one of the UK’s full fibre broadband challengers for more than £100mn, amid predictions of an “avalanche” of consolidation as the sector struggles with rising interest rates and costs.

Paris-headquartered Vauban Infrastructure Partners and Montreal-based Axium Infrastructure are in discussions to acquire Trooli, one of the plethora of so-called “alt nets”, according to three people briefed on the discussions.

Virgin Media O2, owned by Spain’s Telefónica and Liberty Global, had also considered buying the company but dropped out this month because of the price and the estimated cost of repair work required on the network, according to people briefed on the company’s thinking.

The potential sale of Trooli is a sign of pressure within the altnet industry according to industry executives, which is grappling with rising costs and soaring interest rates, which have made it harder to secure private finance.

“Nothing is getting financed right now,” said the chief executive of one of the largest altnets in the UK. “The equity has disappeared for everyone.” 

One industry insider said the sector was “at the start of the avalanche”, referring to an anticipated wave of consolidation.

More than a hundred altnets have popped up across the country, backed by billions in private capital, as part of the so-called “fibre gold rush”, seeking to lay their network before either of the incumbents — Virgin Media O2 or BT’s networking division Openreach — get there.

Although many have managed to lay fibre which can be accessed by thousands of homes, they have struggled to actually persuade customers to move across to their networks. Analysts say that companies need to secure at least 30 per cent of customers in a given location to make their business viable.

Openreach has been furiously building to counter the altnet threat and reach its government-mandated targets. It is planning to change its pricing structure for wholesale clients that do not have their own fibre networks for the second time in two years, a move that has sparked ire from altnet executives and their private equity backers.

Trooli raised £67.5mn in debt from a consortium of lenders in 2021. A document prepared by investment bank Lazard, which is running the sale process, states that Trooli has passed 200,000 homes mostly in the south east of England, costing just £170 per home passed. It also outlined ambitions of reaching 2.1mn homes by 2026, while “consciously avoiding VMO2 footprint”, therefore “building a network complementary to a number of players”.

Trooli, Vauban Infrastructure Partners and Axium Infrastructure did not respond to a request for comment. Lazard declined to comment.