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BT Presses Fiber Advantage as Supply Crunches Trouble Rivals

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(Bloomberg) --

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Worker and supply shortages are tripping up the businesses vying to beat former state monopoly BT Group Plc to build out fiber broadband across Britain.

Labor shortages have been exacerbated by Brexit following prolonged pandemic shutdowns on the civil engineering industry, which is now emerging into a period of inflation.

For the private equity investors who poured billions into challenger networks such as CityFibre and Gigaclear since 2018, the struggle to secure components and workers is fast becoming a headache.

Civil engineering contractor Complete Utilities ceased trading early in November, while another called NMCN went into administration the month before, upsetting plans for their respective customers, M&G Plc-owned Gigaclear and Goldman Sachs Group Inc.-backed CityFibre.

Even larger businesses aren’t immune. Virgin Media O2 Chief Executive Officer Lutz Schueler said on a call with investors that contractors are “getting offers from competitors with higher prices.”

Fiber providers small and large are part of a land-grab to connect customers to fast glass fiber lines before BT’s Openreach, Britain’s only national broadband infrastructure network, which had been accused by rivals and lawmakers as slow to upgrade its network from copper.

Although not immune, London-based BT is better protected. It’s built its own small army of more than 25,000 in-house engineers, and as a FTSE 100 firm can cut more attractive, long-term deals with suppliers. In a November trading update it said it’s actually become more efficient and slashed the cost of building new connections, surprising investors and boosting the stock.

Virgin Media O2, owned by Liberty Global Plc and Telefonica SA, is BT’s biggest network rival and has acknowledged difficulties such as fiber shortages, though played the problem down as short-term. CityFibre declined to comment. A spokesperson for BT referred requests for comment to Openreach, which didn’t immediately respond.

Dozens of entrepreneurs are vying for the workers that remain for their overlapping planned fiber networks. And the crunch has been exacerbated further because many engineers were immigrants, and some left the country to be with their families through lockdowns, said Gigaclear’s head of policy and regulation, James Fredrickson.

These problems have hit Gigaclear’s roll-out in the English counties of Essex and Herefordshire, leading to delays for thousands of households.

A letter about the delays posted to customers by Gigaclear last month cited “the availability of contractor resource due to industry competition and the Covid-19 pandemic” and “the availability of key infrastructure required to build the network due to the ability and cost to import key equipment following the U.K.’s departure from the European Union.”

“You can do a lot of the hard work of digging, laying ducting, laying fiber, but if you haven’t got the components to actually connect somebody, it’s very frustrating, but you’re sat there waiting,” Fredrickson said.

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