Soros-backed broadband firm ramps up pressure on BT and Virgin

AN ultra-fast broadband provider backed by the billionaire investor George Soros has borrowed £100m from a consortium of banks to fund a rapid network expansion that will increase pressure on BT and Virgin Media.

Hyperoptic, which previously raised £50m from Mr Soros’s fund and £21m from the European Investment Bank, said the loans would allow it to reach two million homes and businesses by 2022. The company builds full fibre connections that are more reliable and more than 10 times faster than the best possible on most of the infrastructure run by BT’S subsidiary Openreach.

The plans would put Hyperoptic on a par with Openreach’s current upgrade commitments. BT has agreed to fund two million full fibre connections.

Under pressure from the Government and regulators, Openreach is consulting with Sky, Talktalk and Vodafone, as well as BT’S retail arm, on their appetite for more full fibre. It aims to boost investment to cover 10million premises by 2025. Hyperop- tic said it will cover five million homes by then.

Meanwhile, Virgin Media’s cable network expansion plan Project Lightning, which aims to capitalise on its speed advantage over Openreach by connecting an extra four million homes by 2020, has hit delays as roadworks have proved more challenging than first anticipated.

Hyperoptic currently offers its services to around 350,000 premises in 28 towns and cities. It focuses on blocks of flats where installation costs are lower. A recent full fibre trial to houses in York by Talktalk cost nearly £500 per home, compared to less than £100 per flat under Hyperoptic’s plans. Dana Tobak, chief executive, said that around a quarter of homes it covered bought its services. She explained Hyperoptic had budgeted for lower take-up when it asked banks for loans, taking into account the threat that Openreach and Virgin Media might seek to match its roll-out to retain customers.

Ms Tobak said: “There may be overbuild but we have a better product set.” She added that Hyperoptic’s investment case had been boosted by Government plans to scrap business rate for new broadband infrastructure. The company was taking on “cheap” debt rather than issuing new equity to avoid diluting Mr Soros’s fund and other early shareholders, Ms Tobak said.

The loans are provided by BNP Paribas, ING, RBS and the Dutch investment bank NIBC.

Hyperoptic’s cash injection follows a £200m fundraising this month by Cityfibre, a listed alternative infrastructure builder that works further upstream to provide wholesale connections for new ultra-fast broadband lines.