Exit Insight: TrueSpeed secures £75m from Aviva Investors

July 2017 was one of the most profoundly exciting months for UK digital infrastructure since EE launched its 4G network in October 2012, and once again Acuity’s Marcus Allchurch was right at the heart of the action.

Here, Kelly Horner interviews Marcus on the deal…

Marcus, tell me why July 2017 was such an exciting month?

It is a well-known fact that the UK has massively fallen behind the rest of the world in recent years in the area of digital infrastructure; and that’s important. Smart-cities, flexible working, productivity and ultimately the ability to compete effectively in a connected global marketplace are all dependent on the digital infrastructure we rely on. As an example, in February 2016, OFCOM released a report showing that the number of properties in the UK connected to the internet via a fibre-optic cable was only 2%, whereas Spain, Portugal, Lithuania and others have levels of over 60% with established programmes to increase that further. This all started to change in July, with almost £500m being raised by independent UK fibre companies and (dare I say “in response…”) a further commitment of £400-500m from BT Openreach to accelerate its fibre roll-out plans.

Smart-cities, flexible working, productivity and ultimately the ability to compete effectively in a connected global marketplace are all dependent on the digital infrastructure we rely on

What was Acuity’s role in this fibre-bonanza?

The Acuity partners have a deep understanding of the kinds of technologies which are coming down the tracks, and it has been clear to us for some years now that there is a critical need for more investment in fibreoptic connectivity – you simply cannot deliver smart-cities, connected homes, autonomous vehicles, 5G networks or UHD TV on-demand without it. When we first met the founders at TrueSpeed, a relative start-up in the sector, we were thrilled by the obvious capability of the team and the quality of the plans they had built to construct a contiguous fibre-optic network across the South West of England. Happily, this went both ways, and we quickly signed-up to work with them to arrange funding. This all came to a head in July when we concluded the process, and announced that TrueSpeed had secured £75 million on very favourable terms from Aviva Investors.

When we first met the founders at TrueSpeed … we were thrilled by the obvious capability of the team and the quality of the plans they had built to construct a contiguous fibre-optic network across the South West of England

What does £75 million mean for TrueSpeed?

It costs TrueSpeed around £1,000 to run their network past a property, so in rough terms £75 million provides the company with enough funding to deliver its base case plan to pass 75,000 homes and businesses over the coming four or five years. What is worthy of note, is that other companies in the sector have been forced to raise small amounts of funding every few months for their first couple of years in order to create a sufficiently large asset-base to be seen as an acceptable risk for investors. Acuity’s process articulated the opportunity in a way that provided that confidence early-on, and as such the team are now able to focus 100% on delivering their plan without the distraction of any more funding rounds.

How did you manage to secure such a substantial investment in TrueSpeed?

In short, Aviva and others bought into the TrueSpeed plan as we presented it. Infrastructure investors look at long-term returns and that is something which fibre networks are great for: once the infrastructure has been deployed there is no business-case for others to “overbuild”, meaning that as a shareholder you can have considerable comfort over the long-term cashflows. Indeed, as the networks scale a number of additional opportunities should present themselves which will provide upside from the base-case plans.

Talk us through the process itself, how did it go?

All processes have their challenges, but this one went relatively smoothly: TrueSpeed’s existing shareholders supported the company throughout the process, management did a great job, and we were successful in bringing a number of funders to the table – which enabled the negotiation of a great deal for TrueSpeed.

TrueSpeed’s existing shareholders supported the company throughout the process, management did a great job, and we were successful in bringing a number of funders to the table – which enabled the negotiation of a great deal for TrueSpeed

We worked with Thrings in Bristol who represented TrueSpeed, and CMS Cameron McKenna Nabarro Olswang LLP who represented Aviva. Thrings had been working with TrueSpeed on a commercial basis for a number of years. Both legal teams worked well together and adopted a pragmatic approach.

And the result?

The funding of TrueSpeed was a great result for all involved, but specifically for the public living and working in the South West of England where TrueSpeed will be building their network. The team are now busily delivering on their 100-day plan, and I have every confidence that they will enjoy the coming years of uninterrupted network deployment!

Read the original press release HERE.

Marcus Allchurch, Partner

Marcus Allchurch, Partner

About Acuity Advisors LLP

Acuity partners have decades of collective experience in the telecoms sector, working with carriers including BT, Vodafone, Telefonica, EE, Telia, Telenar and numerous mid-market sector participants.

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