Yahoo Finance Former Thames Water owner Macquarie mulls sale of KCOM
The former owner of Thames Water is exploring a knock-down sale of Hull’s monopoly broadband provider amid growing competition from upstart networks.
Australian investment bank Macquarie has appointed advisers at PJT Partners to conduct a strategic review of KCOM.
The review could lead to a sale of the telecoms firm or a merger with a rival network provider, though sources cautioned that no final decision had been taken.
Hull is in the unique position of being the only UK city not served by BT’s Openreach network after KCOM refused to merge with other regional providers during the formation of the former telecoms monopoly.
Macquarie bought KCOM for £627m in 2019 after fending off a rival bid from pension fund Universities Superannuation Scheme (USS) in a fiercely-fought auction. It came at a time of rock-bottom interest rates and optimism about the long-term returns from broadband infrastructure.
Analysts privately warned this week that the price tag was now likely to be much lower than the one paid by Macquarie.
KCOM, which was founded in 1904 as Kingston Communications and is known for its distinctive cream-coloured telephone boxes, long held its own monopoly in the Yorkshire city.
The company was previously listed on the London Stock Exchange and was once one of Britain’s most valuable companies with a market value reaching almost £5bn.
But its dominance has been challenged by the arrival of independent full-fibre broadband networks, dubbed “alt-nets”. Cityfibre, Connexin, Grain and MS3 Networks are among the smaller challengers that have begun to build rival networks in Hull in recent years.
KCOM has also begun opening up its network to more third-party internet service providers.
Under its ownership, the telecoms firm sold off non-infrastructure businesses and refocused on its core operations in Hull.
The Australian bank believes KCOM is now well-positioned for a looming wave of consolidation among alt-nets, whose debt-funded rollouts have come under strain from the recent rise in the interest rates.
KCOM turned its first pre-tax profit under Macquarie’s ownership in the year to the end of March 2023, according to its latest available accounts.
Current earnings are understood to be around £50m, while its network covers more than 300,000 premises.
Virgin Media O2 and Cityfibre are among potential suitors should the company be put up for sale.
It comes as Macquarie, which is a major investor in UK infrastructure assets, faces fresh scrutiny over its ownership of Thames Water, which is now racing to stave off collapse.
The Australian bank has been criticised for loading up the utility with debt while it owned the company. It is still a lender to Thames Water’s holding company.
Macquarie declined to comment.
