Story of a comms sector giant

Freedom Fibre CEO Neil McArthur MBE brings together his own remarkable career story with clear analysis of how the UK full fibre market is shaping up.

The name Neil McArthur has become famously synonymous with entrepreneurialism in the telco space, but perhaps surprisingly he identifies himself more as an engineer, based on his electrical engineering background and the influence of his father who worked in the steel industry. In fact, McArthur was an apprentice with British Nuclear Fuels before entering the telecoms sector in the mid-1990s when deregulation took place, setting up Opal Telecoms. From the outset, Opal was a relatively small B2B player in the days of voice and pre-dated broadband.

Opal Telecom merged with Carphone Warehouse in 2002 to access more capital and this propitious deal established the foundations of TalkTalk. “We entered the broadband market and built what we termed ‘the next generation network’ which made use of metallic path facilities (MPF),” stated McArthur. “This allowed us to offer voice and data over a converged network that we rolled out across the UK to over four million customers, which at that time represented 18 per cent of the market.”
The business demerged from Carphone Warehouse in 2010 and developed into a consumer and B2B provider, namely the high profile brand that TalkTalk is today. McArthur ran the technology side of TalkTalk for eight years and was a non-executive director. He then ran Fibre Nation, a direct trenching FTTP venture based in York which was sold to CityFibre for over £200 million. Following the handover, McArthur and his executive team set up Freedom Fibre to bring full fibre broadband to rural and hard-to-reach areas. That was less than three years ago and since launch McArthur has leveraged the full gamut of his experience.

“Having seen first hand the technological advancement and growth during my time with TalkTalk, when fibre finally matured we were able to hit the ground running and start building full fibre networks,” added McArthur. “Initially, the project was about finding out how we could effectively and economically build full fibre networks and over a three year period we evolved sophisticated models using passive infrastructure access to avoid the disruption caused by new network build.”

Divergence has its limits and in time we need to converge and ultimately consolidate the industry. There are well over 100 altnets in the UK and that’s not sustainable

The company (which currently has a 200-plus headcount) is based in Irlam, Greater Manchester, with its build area stretching from Greater Manchester down to Shropshire and into north Wales. Across its north west heartland Freedom Fibre has accrued over 100,000 premises passed and is on track to expand to over 150,000 properties through 2023 as part of its ambition to achieve a contiguous network serving two million properties, including 70,000 contracted for north Shropshire through a recently won Project Gigabit Scheme. But none of these successes have come easily. “Trying to establish a new telecoms company, especially in something as capital intensive and engineering intensive as fibre, and achieve excellence, is immensely difficult,” explained McArthur. “So the obvious approach for us was to focus on what we know best, the engineering.”

Engineering pedigree
As an engineer, McArthur’s main focus has always been the effective deployment of capital within telecoms markets. “I know from my 20 years at TalkTalk it’s difficult to run an engineering-focused organisation in conjunction with an ISP, which is a retail and customer focused entity,” he added. “Therefore, Freedom Fibre was set up to always be wholesale. TalkTalk is our anchor ISP with great experience in delivering a retail and consumer product, so it made sense for us to partner with TalkTalk on both a consumer and B2B wholesale offering.”

Freedom Fibre began life with seed capital from McArthur and several private investors. The business received a solid endorsement of its model and execution in May 2022 when it raised £100 million through a £16 million Santander Bank debt facility, and an £84 million investment from infrastructure investor Equitix. To date Freedom Fibre has secured over £111 million of funding including a small injection from TalkTalk. “We’re already in conversations to increase this capital to expand our build footprint,” noted McArthur.

Overall, the altnet community and its investors have raised circa £17 billion to play their part in the UK FTTP roll out, which should see the UK well on the way to full fibre coverage by 2030. McArthur also noted that to achieve full fibre coverage across the UK, the Treasury has only had to contribute £5 billion (to subsidise the hardest 20 per cent). “Given the economic value that delivers for the economy, let alone the positive impact on the environment, that is a huge win for the nation,” stated McArthur. “Some altnets are urban focused, others are rural, some are retail ISPs and some wholesale only. The divergence of this enterprising industry is typical of a hot new tech sector that attracts capital and the entrepreneurs to consume it.

“However, deep down we and our investors know that divergence has its limits and in time we need to converge and ultimately consolidate the industry. The sooner we accept this and take steps to ensure it happens in an orderly manner, protecting invested capital, the better. There are well over 100 altnets in the UK, of which over half are doing significant builds, and that’s not sustainable. The sheer difference in the number of IT stacks that people have to build is completely impractical. So, consolidation is inevitable. It’s up to all altnets to present ourselves as a common interface, and that will happen when shareholders decide it should happen. We don’t own these businesses, the shareholders do. Our job is to get on with building the network and getting customers on it.”

Consolidation trends
McArthur noted that capital is already starting to tighten up in the marketplace, and he foresees that during the coming two to three years we are going to see a ‘real coming together’ of the top second division outlets, as he calls them, to form bigger groups with multiple companies behind them rather than single investments. “It’s the natural order,” he said. “It needs to happen not just because the ISPs which consume the wholesale products from the networks need to see common standards, there is also a tightening of capital – these will be the big drivers for consolidation.”

We don’t own these businesses, the shareholders do. Our job is to get on with building the network and getting customers on it

According to McArthur, instead of 50 or 100 altnets, it actually needs three to ensure good solid competition. “Ofcom will no doubt shape regulation to encourage sensible consolidation at the appropriate time,” he added. “The key to this, to make it go faster, is to make it consensual and capital efficient. If we succeed, then consolidation will happen more as mergers than takeovers, and Freedom Fibre will be in the thick of that. We are just about in the top 20 in the country, that’s still pretty small. But we are driving the agenda on standards and have a close relationship with a major ISP, one of the few altnets that do. And we have a lot to say about this industry with good solid investors behind us.”
When Freedom Fibre realises its long-term objectives McArthur will add the achievement to an already impressive catalogue of accomplishments, which of course includes taking Opal Telecom, a small telco, through various acquisitions and relationships, and turning it into a national comms firm. Transiting out of engineering in the nuclear industry into telecoms was also a bold and rewarding step. “It’s given our family a comfortable lifestyle and enabled us to operate a large charity,” commented McArthur. “Our family charity, the Hamilton Davies Trust, funds capital projects in Irlam where I grew up. We have put back over £23 million in grants and capital investment into the town, and I feel good about that.”

Just a minute with Neil McArthur...

Role models:
Isambard Kingdom Brunel: The things he achieved at his age and how he managed to convince investors to do some outrageous things was unbelievable. And Elon Musk – his vision is remarkable.

Tell us something about yourself we don’t know:
I’m a petrolhead. I race cars and fly light aircraft.

Your main strength?
I’m a tortoise not a hare. I just keep going and am persistent.  

Three ideal dinner guests:
Isambard Kingdom Brunel, Elon Musk and Andrew Carnegie.

The biggest risk you’ve taken:
Moving into telecoms from electrical engineering in 1996 when I set up Opal Telecom.

Industry bugbear:
We haven’t got standards right. As an industry we are not anything like as efficient as we should be. And where altnets overbuild we get grumpy. We will absolutely not overbuild other altnets.

If you weren’t in ICT what would you be doing?
Probably an academic. But I’ve got the job I was destined to have. My dad worked in the steelworks and taught me engineering. I have lived and I love engineering.

One example of something you have overcome:
I’ve had heart problems which at one point looked like it might floor me. But I’ve had a pacemaker fitted and now I’m doing 5k runs.

How would you like to be remembered?
For helping to regenerate my home town of Irlam and Cadishead.

How do you relax?
Gardening, tinkering in the workshop on things like building railway signals.

Top tip for resellers:
If you don’t add value, don’t expect to make a profit.


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