Market Watch

Macquarie Explores Exit as Competition Intensifies in UK Altnet Market

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The Australian investment bank, Macquarie, is reportedly considering an exit from KCom amidst escalating competition within the UK alternative network (altnet) sector. A recent report in The Telegraph suggests that Macquarie has engaged advisors from PJT Partners to conduct a strategic review of KCom, indicating potential changes on the horizon.

Sources familiar with the matter speculate on the diminishing asking price for KCom compared to the £627 million acquisition by Macquarie in 2019. Analysts, speaking on condition of anonymity, assert that present market conditions could significantly reduce KCom’s valuation.

KCom faced turbulence in 2018, marked by a profit warning, dividend cuts, and increased debt, leading to a 36% drop in its publicly-listed shares. Amidst this uncertainty, several potential buyers emerged, including Virgin Media O2 and the Universities Superannuation Scheme. Ultimately, Macquarie secured the acquisition through a competitive auction process.

Since then, KCom has invested approximately £200 million in upgrading its infrastructure, expanding its fibre networks, and strengthening its market presence beyond Hull. With a network reaching 300,000 premises and serving approximately 150,000 consumers and businesses, KCom maintains a significant position in the region.

Despite these investments and a reported annual earnings of around £50 million, market speculations suggest a lower valuation for KCom, reflecting broader economic trends and intensified competition in the altnet industry.

Rumors circulate potential suitors for KCom, including VMO2 and CityFibre. CityFibre, focused primarily on the wholesale market, may target KCom’s infrastructure and wholesale operations. On the other hand, VMO2, backed by Liberty Global and Telefónica, could integrate KCom’s retail arm into its operations, aligning with its strategic expansion plans.

If acquired by a national player, KCom’s potential sale signifies the end of an era for the regional incumbent, which has operated for over a century. Regardless of the outcome, KCom’s legacy as a key player in Hull’s telecommunications market remains indelible.

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