City Focused UK Full Fibre ISP Hyperoptic to Cut Jobs as Build Slows
Network builder and broadband ISP Hyperoptic, which earlier this year revealed that their gigabit-capable “full fibre” (FTTP/B) network had covered 1.15 million UK homes (inc. 275,000 customers), has today announced that they’re proposing to make around 110 redundancies (mostly build engineers) and refocus others to customer-facing roles.
News of job cuts is never good, although the operator stressed to ISPreview that the proposed changes to their engineering workforce – mostly impacting network build teams in Scotland and North West England (i.e. where the rollout of their network is now said to be almost complete) – was not being drive by KKR or any economic challenges.
As part of this change Hyperoptic said they’d also be redeploying around 40 network build engineers into customer build and customer connections teams, and into the New Build Homes part of their business where they’ve seen good performance – thanks to improvements in wayleave signing, delivery, and customer take-up rates.
In addition, the operator said they’re working to remove a layer of management in their Infrastructure Division to help simplify their processes and deliver more quickly. Some of today’s changes reflect the fact that Hyperoptic has somewhat evolved from focusing solely on MDUs (blocks of flats etc.), to also serving New Builds, existing houses and more.
Dana Tobak, Founder & CEO of Hyperoptic, said:
“In support of our continued growth at Hyperoptic, we have refocused around 40 employees on customer-facing engineering roles, and are proposing to make around 110 redundancies in the UK as we increase our focus on areas that offer us the greatest customer reach.
Where necessary for the customer-centric roles, we will provide support and training to help keep our people in Hyperoptic – building on their skills, experience and expertise. For those employees that do move on from Hyperoptic, we will ensure the support they receive reflects the great work they have delivered for this company.”
Naturally, we queried whether the job losses from their build team might impact upon their target of reaching 2 million premises by the end of 2023, which it should be said was only set in February 2022 and after they downgraded it from the prior goal (here). In case anybody has forgotten, Hyperoptic originally aimed to cover 2 million UK homes by the end of 2021 and 5 million by 2024.
The provider informed us that they’ve actually revised the 2m target internally some time ago, but haven’t yet set a specific new timeline or communicated it externally (until now). The expectation is that Hyperoptic will now hit this mark sometime in 2024, but we were told that this delay (another one) is not related to the aforementioned redundancies.
Hyperoptic remains adamant that they’ve now achieved the network build rate they aimed for, have roughly completed their Hyperzone builds in Scotland and North West England, and are ready to focus on their next phase – scaling their customer-oriented Infrastructure delivery teams to boost value (take-up etc.). But like it or not, to many people, this will still look like they’re about to miss yet another coverage target.
Customers of the service typically pay from £25 per month on a 24-month term (plus £29 activation) for a 50Mbps package, which rises to £45 for their top 1Gbps plan with free activation (currently free for the first 3 months of service). The provider also offers a social tariff for those on benefits.
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and Linkedin.
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They won’t last long until gone into administration!
Believe they’re fine right now and would counsel some caution before claiming a company will go into administration with no evidence. All of them will cut jobs as they complete their builds.
Indeed and a lot of those will be Kelly’s crew working on CF contracts as I was until last week when the contract ended. But there is no shortage of work for Engineers right now.
@Phil, what is it with this place that people seem to want companies to go into administration? As builds come to a close, sadly there are going to be fewer jobs, I presume people who applied for these jobs know this. Hopefully those that are affected will get other jobs.
Nobody (well, other than Virgin Media and BT) want altnets to go into administration, but some altents simply haven’t got a viable business model, or are badly managed and will run out of cash.
I’d reckon (as an outsider) Hyperoptic is much better run than the average altnet, and with 270k customers they’ll have sales of £70-75m a year. That’s much more attractive than the smaller, scattered altnets who have stuff all customers and incomplete builds, so even if the worst happened somebody else will pick up the assets and the customers.
The problem for Hyperoptic is that their balance sheet will currently be carrying accrued losses of around £270m, and they have debts approaching half a billion quid. If we treat that as near enough the capital employed, then they need to have EBITDA of £32m to be a credible investment case, and I’d guess from time series data in their accounts that EBITDA this year is about zero. With ARPU of around £30 a month, and GM of 80%, then they’d need to add a further 110k customers from the current footprint – that’s a very big ask, as is taking on 40% more customers without destroying your own customer service. If they do that, it still that makes payback on the investor’s equity a very long way off, and ignores the trouble that rising interest rates will have on my ciggy pack estimates. A 2% rise in interest rates compared to a couple of years back means the interest costs go up by almost £10m, so to cover that means either signing up another net 35k customers, or a 15% increase in average customer bills – and we’ve not even thought about rising operating costs yet.
That’s not a prediction of doom; I think Hyperoptic have a good reputation, a very clear idea of their route to market and their customer base, and are well run. On the other hand, the future looks very, very challenging, and the underlying cause is spending a vast amount of money to build a business in the expectation that there would be an army of secondary investors happy to take it all off their hands for a premium whilst growth looked strong. With London equity markets firmly in the doldrums, rising interest rates, and the creaking of ice under other altnets, it doesn’t now seem likely that the existing investors can exit on a happy multiple unless they find a mug who is really rubbish at M&A. Maybe if Vodafone’s merger with Three gets booted out then Voda would buy Hyperoptic? Voda’s management have always been crap at M&A, and if the Three merger falls through, Voda will be looking for something else to distract them from having to think about improving the threadbare state of Voda’s UK mobile business, and buying Hyperoptic wouldn’t have any competition concerns. So there’s plenty of hope yet.
Hyperoptics customer service is in Serbian salaries like a huge chunk of their staff so them ballooning in staff to accommodate the needed big influx of customers is not such a big deal for them. Most alts are overstaffed and that’s why many of them have been trimming a lot of the fat but would collapse if they had HOs staff numbers but in UK salaries
@John: It still does matter because Hyperoptic make a gross profit but an operating loss, and that’s because the cost of customer service, sales, admin and overheads which feature in operating costs completely wipe out the gross profit, even if we selectively ignore depreciation. From what can be seen in statutory accounts, they could probably manage to get the operating profit to a neutral position by a mix of additional sales and further cost trimming (although where’s cheaper than Serbia?), but they’d still have £30m or so of depreciation that would be another year of mid double digit losses being added to the balance sheet.
The only two ways I can see forward are either some financial restructuring (ie writing off the equity investors money and only paying back some of the debt), or significant price hikes that actually factor into ARPU. And that last one is a challenge – even VM, famous for their regular, userous increases in tariffs struggle to convert that into increases in ARPU, because they have to battle churn, offer big retentions discounts, and run expensive marketing to keep customer numbers broadly static.
I like the Hyperoptic business model, I rather like the company, but I’m struggling to see a realistic path from where they are now to becoming a sustainable business that covers its cost of capital. Would I invest in this if I could? Not on your nelly. Would you invest your money in it, even on my nelly?
“They won’t last long until gone into administration!”
Given they have a large number of real paying customers and no debt cliff edge that would seem very unlikely indeed.
Start rumours of ‘difficulties’ is a nasty thing to do to smaller businesses.
This looks like a sensible action in the midst of a cost of money squeeze.
Move to a take up orientated model and boosts customer service levels which boosts income and retains existing customers by providing better service. It does actually make a lot of sense.
Hyperoptic has not “covered” 1.1m, if anything that is Community Fibre’s number
The problem is too many housing associations and councils are restricting deployment, no doubt there with be some type of incompetence and corruption going on.
Are you able to qualify that statement? How exactly are they restricted development?
Every council I know is trying to attract investment from fibre operators.
I used to work there as a network splicer sometimes we used to sit around waiting for jobs for months while on salary as we had to wait for build teams the problem was back then everything was done in house and during in quiet times everyone still had to be paid ect it’s a shame as the place was good to staff
All those ex Openreach employees getting the chop
wait they employed the build engineers? didn’t hire contractors? I ask because i’ve only ever seen contractors working for fibre companies (Except Openreach)
Are you implying openreach don’t use contractors?
I think he means that he sees openreach teams(branded vans, uniform,signs etc) working, but not those for other networks, other than generic contractors.
Yes cable pullers and everything was done in-house apart from Civils this changed the last few months
Zzoomm have their own, in their own van and uniform, Openreach uses Kelly for some of their installs, i feel sorry for people who have them in their house.
Openreach use tonnes of 3rd parties for splicing, cabling, testing and civils.
Not sure about down south but in Scotland you barely see their own guys doing work it’s mostly KN Circet and Morrisons
Surely we should all jump to conclusions about their Financial State because that’s the usual thing to do here
I mentioned this on another post, a lot of alt nets are now focusing on customer connections, less build staff more field.
In other words let’s see bums on seats for what we’ve already built before we build anymore.
Yes exactly.
Not long along Cityfibre were announcing new builds on a weekly basis, now they seem to have gone very quiet.
I suspect investors will want to start seeing take up increasing before they commit to funding more builds.
And why not?
It is simply monetising an asset?
That makes business sense as money is getting expensive now for boosting ROI is important to keep investors happy.
Hyperoptic is one of the older alt nets and re structuring was always going to happen, every business needs to focus on the future. Contractors are the way forward as you won’t get slaughtered for laying them off instead and can employ contract management managers instead of hundred of engineers on the books.
I hope they’re not putting anything heavy in that van, it has a gross load weight (ie before you add fuel and people) of just 750kg!!
Most alt nets put a lot of effort into the rollout but then fail to carry out good marketing
Currently they should be able to come in with pricing below that of Openreach based ISP’s as they are not saddled with the legacy cost of the old voice network
Has anyone even seen their YouTube ad? It is pretty dumb and only exists to fulfill ESG commitments
Let’s be realistic…
It’s inevitable that once the Altnets start slowing up their builds then they’ll start laying off the staff involved with organising the builds.
Now they’re pumping all their resources into marketing and sales, trying to increase take up as quickly as possible, trying to start getting some income from the investments.
However, as we are all well aware, take up is slow, there’s not enough customers to go around, not enough take up to make it profitable.
So what’s the next step for the Altnets?
I think we already know… Sell off, consolidation or maybe something else?
The next 6 months are going to be interesting.
It won’t do the altnets any good if they keep overbuilding each other. Openreach built out a large part of our town (Banbury), Swift Fibre are now building too and Hey! Broadband are supposed to be building too. I can’t see more than 2 networks in 1 Street is likely to be viable bearing in mind in our street Openreach has taken nearly 2 years to get to 36% (22/61 properties) take up and so far they have been a monopoly supplier!
@Big Dave
No it won’t be viable, but they keep ploughing on, investing more and more money.
It’s going to end in tears.
Sure they will be interesting.
But Hyperoptic are exclusive suppliers to a lot of MDU’s and large office buildings/estates.
So I would see their income from those areas as being quite stable and not perturbed by OR discounting.
Equally, Hperpoptic’s SDU might well be peturbed by OR (or other) discounting where there is overbuild.