Bigblu has secured £12m in funding to accelerate the growth of its UK Fixed Wireless Access (FWA) subsidiary QCL. By combining this money with grants from BDUK and investment from internal cashflows, QCL expects to quadruple its subscriber base to 30,000 by November 2022.
The £12m funding for QCL comprises £4m in new equity, a further £4m in equity available on request plus a £4m credit facility from HSBC. The equity will dilute Bigblu’s stake to c 70% but it will still consolidate QCL’s financials and the implied £15m pre-money valuation is double its initial investment. QCL is already growing and profitable: the subscriber base is up from 4,500 in August 2017 to 7,500 currently and its FY18 EBITDA margin was 47%. The funding aims to accelerate growth further. QCL believes it can quadruple the subscriber base to 30,000 by November 2022 with investment of £20m (including internal cashflows and an expected £6m in grants from BDUK). This plan includes £4m for acquisitions.
Bigblu sees a large opportunity to use FWA to provide high-speed broadband in underserved rural areas in the UK. BDUK, a government agency designed to expand gigabit broadband availability, expects to award a total of £200m over the next two years and recently raised the grant per connection to £1,500 for every residential home and £3,500 per SME. Unlike Bigblu’s satellite operations, FWA typically requires upfront investment in both network and CPE to attract customers. By raising funding for QCL, Bigblu can ensure QCL’s customer acquisition plan is fully funded without compromising investment in the rest of the business.
Bigblu indicates the financial impact to the group will be marginally dilutive at an EPS level in FY19, largely neutral in FY20 and significantly accretive to revenue, EBITDA and EPS by FY21. FY20 consensus EBITDA has risen 4% from £11.1m to £11.5m since July. The new funding reduces net debt/EBITDA to c 1.0–1.5x
The rise in consensus has been mirrored by the share price over the last month, leaving the 8.0x FY19e EV/EBITDA rating largely unchanged. Bigblu continues to trade at a discount to its UK-listed telco peers despite its growth prospects.