Broadband altnet CityFibre reportedly preps up to £2bn UK haircut on debts
A new report claims that the UK’s largest alternative Full Fibre broadband network, CityFibre, is preparing to ask lenders (NatWest, Lloyds and Société Générale) to accept a huge write-down on their debts as part of efforts to “establish a strong, long-term capital structure for the business“. The move is predicted to cost lenders up to £2bn.
CityFibre has so far built their Fibre-to-the-Premises (FTTP) based broadband network to cover 4.8 million UK premises (4.6m RFS), which is home to 1.1 million customers. The company also reported their annual accounts last week, which showed revenues of £164m (up 36%) and adjusted EBITDA quadrupling to £60m, but they also had total liabilities of £6.06bn (up from £5.12bn) and their loss after tax increased to £397m (up from £378m).
The same results also revealed that the network operator had prepared £900m in a “new equity commitment” to help drive future consolidation in the altnet market, which is currently under significant strain from rising build costs, high interest rates and competition. However, CityFibre itself is not immune to such strains, which means that they also need to get their own underlying finances in order.
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The operator’s CEO, Simon Holden, last week informed the market of how they recognised that their “capital structure needs to evolve to support our acquisition drive” and had thus been in “discussion with our lenders to establish a strong, long-term capital structure for the business.” According to a new report in the Sunday Telegraph (paywall), the cost of securing the aforementioned equity deal is allegedly set to involve lenders agreeing to a massive haircut worth up to £2bn on their £3.8bn debt pile (including banks converting some of their debt into equity).
Such an approach has, over the past year, become increasingly common across the UK’s embattled market for alternative networks. Gigaclear (here), G.Network (here), KCOM (here) and Airband (here) are just four recent examples, but more are sure to follow and that now seems likely to include CityFibre.
The newspaper’s insider sources indicate that the exact figures and detail of CityFibre’s agreement on all this has yet to be finalised and some lenders are expected to take a bigger write-down than others. For example, the state-backed National Wealth Fund (NWF), which has contributed c.£300m of public funding to CityFibre, will reportedly not be impacted by the refinancing. Tough year to be an equity investor and creditor in this market.
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook, BlueSky, Threads.net and Linkedin.
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City Fibre once had a great future ahead of it. Things started going down hill after Greg Mesch left. All of the best people have left, many reporting that the approach of the COO has left the business ill equipped to run the business as it is, let alone integrate any future acquisitions. The new IT Director who came in at the start of the year promised the world, but the team are at a loss to understand the roadmap and strategy. When all the COO does is criticise and not offer a meaningful vision, decline and increased operational risk becomes inevitable.
I do not think you can put all the blame on the Directors. They must respond to the directions of the investor/owners. The business has also been exposed to the rising costs imposed on tehsectrodue tolegislation, external inflationary pressures, and the cost of borrowing.
I think the strategy is to put the business up for sale.
The accounts showing loss of £545 million on £170 million of revenue with cost of finance of nearly £400 million are to year ending December 31st 2025. Greg’s departure was announced in September 2025. The amount of debt they incurred building the network under Greg was totally unsustainable. The only reason it wasn’t an issue earlier was very low interest rates secured during the pandemic.
Even with Sky as a customer they aren’t making anywhere near enough to pay their interest bill. No prospect of that changing without restructuring regardless of who’s in charge. At some point, probably pretty soon, they’d breach covenants with the consequences that entails.
Apparently the Monday ops board meetings are comedy gold. The COO speaks and the rest of the senior directors look at each other eyes rolling. The issue seems to be constant pivots and changes in direction. The CTIO doesn’t make key decisions which leave most programmes in limbo and at risk (assuming they are not stopped with zero notice, which happens more often than not). There simply isn’t the capability or leadership to integrate a new network even if they wanted to.
Didn’t these want to buy Netomnia. I guess they dont have the funds in the bank for it.
Any cut in the level of debt would make CityFibre a more attractive takeover target.
Who would take them on though? The cma’s decision and overbuild make VMO2 unlikely, while Openreach is ruled out for similar and other reasons. None of the other players are presently big enough to mount an attractive offer. More likely, I think, is lenders take more control and play the long game.
@ Lister:
I think it is obvious who the primary candidate would be. There are indicators from what is going on outside the UK and other little indicators popping up at home.
China Telecom?!‽
@Emma:
Be sensible.
Cityfibre started installing the conduit for the fibre under the road in my area 17 months ago. The street cabinet arrived in February. So far, no one has been informed that the system is ready to use although the fibre does reach the connection in the road outside my house. Why are they so slow?
A lot has changed in those 17 months, particularly the costs imposed on businesses by government regulation and other inflationary pressures.
CityFibre don’t sell to retail customers. It wouldn’t be them contacting you because they have nothing to sell you.
Goldman Sachs is one of the largest banks in the world, why dont they pay up?
What’s in it for them?
They are more than likely to be contributing to the funding of additional liquidity for the business.
What do you think happens if GS lends them more money at the higher current interest rates???
so why should the other banks pay for Goldmans sacks folly? Goldman could pay off the debt in 5 minutes
Why should Goldman Sachs pay for their folly? They’re the ones who made the loans knowing there would be a risk of non-payment.
BT should swoop in as a Supplier of Last Resort, I reckon…
Seems like more and more desperation from the board, numerous redundancies across most of the departments have cut the paybill, incomplete BDUK contracts handed back, build programmes frozen for months on end and actual orders not fulfilled & knocked back because they cost slightly more than a few hundred quid to complete and it is still not enough to save a sinking ship.
To many of us from other telecomms companies who had decades of experience and went onto work for CityFibre the optimism and ambition of the build shown by the of the board was both commendable and exciting.
However talk is cheap and building new standalone networks isn’t.
The upper managerial decisions to build at any costs, the lack of financial governance to actually account for what was planned and (allegedly) delivered, the lack of commercial awareness to hold build partners to account for mismeasures/poor quality & delivery was shocking. Design decisions to build a brand new network when there was a perfectly good PIA option avaliable that would save both time and money as “we need to keep our build partners happy” were all massively frustrating for the teams working on the build everyday.
All of these decisions and many, many more were made with Simon Holden in charge as the COO and he was then made up to the CEO, so if he wasn’t aware of what was going on with the run rate of the build and the issues going on everyday has he and many members of his executive team been asleep at the wheel ?
I for one am glad to be out of it but I can’t see a way back for cityfibre short of a firesale buyout as they don’t seem to have too much cash for everyday running let alone an M&A target purchase.
The ship is badly holed below the waterline and I hope the few people left get to go on a lifeboat before it’s too late.
City Fibre is the Grenade with the Pin half pulled out, another economic shock that pin falls out and it becomes a distressed business. Haircutting Debt may make it an attractive proposition for somebody to purchase, but I see a firesale inbound. They had a vision a terrible board in the beginning who were in real terms full of the Brown Stuff. Sold a dream, contractors bought into and quite a few lost their businesses as a result all for trying, whether they were good or bad, they took the risk to try it. Then staff, the volume of redundancies is unbelievable and no doubt more to come and recent comments show that they are tone deaf. If Openreach actually get round to checking quality on the PIA builds and if for whatever reason feel they want to countercharge CF for any out of specification works, that may be one liability to far.
Great concept, bad leadership, should never have been a race, in this scenario the Tortoise will win and the hare gut hunted and gutted, which is the events you see playing out today. The debt pile is not recoverable in the current climate, there is no long game on this one.
I think the maximum fine that can be raised by Openreach for PIA issues is £250k per annum per company. I believe that will be put down as part of the annual running costs for the foreseeable future. The costs to rectify all of the issues will be much, much higher than the fine, even if they knew where all the issues were and still had staff available to Q check the work.
As you said many people (and investors) were sold a dream but that never full materalised due to poor, naive leadership.
Yet another AltNet which is a complete financial basket case however, I have no sympathy’s for the greedy lenders who will lose money when the debts are inevitably reduced. I wouldn’t touch an AltNet with a barge pole!
Agree it’s a commercial mess, but why are the lenders greedy? My assumption is when the original business case as signed off, it had a lower cost per premises passed than happened; the build out would be faster; inflation would stay low’ish; and take up would have been faster with better penetration. Obviously any business case is full of assumptions, which you would expect to have been rigorously tested based on the type of investors and the size of the investment put in. I just don’t think this means the lenders were greedy – if anything unlucky or at worst naive. Any investment is a bet and this one is not looking good.
What will be left an asset that has value. Not as much as has been poured in, but when you look at railway or canal mania from the dim distant past, some of the investors here saw big losses too, but we are still benefiting from that infrastructure today.
Would I still use an alt-net network? Personally yes, but I’d want to buy it from an independent ISP where if things went belly up, they had the incentive to continue service via an alternate avenue. Zen with the fibre hub are well placed, and I’m just a fan, not an employee.
I do wonder of Nexfibre will consider lowering their Netomnia bid now CityFibre obviously are not in the game whatever happens with the CMA? Plus on the basis any CityFibre valuation reduction that this news indicates, it sets a wider precedent in the alt-net industry?
To be fair it’s not as if VM and OR are financial wizards either. The whole industry is a financial disaster.
Total debts of £6,060,000,000 and only 4,800,000 premises passed. Even with a take up of 100% that’s a debt-to-connection of £1262.50 PER PROPERTY. And that’s at 100% connection rate.
Whoever signed off that business plan needs to have their head examined and the people who lent them the money on the back of it deserve to lose every penny.
Not only that unlike pretty much everyone else, Cityfibre is not the ISP so they only get a fraction of connection money which makes the math look even worse
If anyone was in any doubt about the altnet business, then the brutal reality is that huge growth fueled by low interest rates cannot work when all manner of costs have risen whilst waiting for customer take-up. There is no doubt about it: CityFibre is in serious trouble and cannot survive unless it gets a big ‘haircut’ from its creditors. CityFibre will be bumping up against its debt headroom by June 2027, so won’t be able to borrow more, hence the need for this haircut to give it a better a capital structure. And CityFibre buying Netomnia was never a serious possibility.
You know the old saying: if I owe you £10,000 I’m in trouble, if I owe you £1,000,000 you are in trouble. So, we have a situation where both CityFibre and its creditors are trapped in these huge debts and creditors dare not let it go bust and get a pittance, so creditors will almost certainly opt for a debt-to-equity swap where the unsustainable portions of the senior debt are wiped out and converted those loans into majority or significant equity ownership in CityFibre. By taking control of CityFibre (with less debt and interest payments), the banks can stabilise CityFibre for a sell-off.
then why should uk and french banks bail out the worlds largest bank for their bad debt? IF Goldman knew their would be “a non-payment risk” then thats bad bank business, and Goldman deserve to loose its investment. The phone company would then go into adminstration and be sold off cheap.
Their wages bill is still very high, averaging £74k per employee, plus 12% into pension.
One lucky director got £5M last year! I don’t suppose ex Goldman staff expect anything less?
Do the investors really think they’re getting good value for money?
We get 5% pension, not 12.
The 2025 accounts show £110M Pay, £13M pension for 1,473 employees. Someone is getting those pension payments!
The CMA’s stance on the nexfibre/Netomnia deal makes total sense if you step back and look at the broader market wreckage.
To break down what’s happening here: altnets are essentially suffering from a mini-2008 moment. Lenders irresponsibly handed out eye-watering sums when interest rates were near zero. Now, the cows have come home to roost, much like Thames Water, these companies simply do not generate enough revenue to service their massive debt mountains.
Lenders can either ‘repossess’ the ISP (as they did with Gigaclear) by wiping out the equity holders, taking a debt haircut, and setting a cleaned-up business free; or equity holders refuse to pump in more cash and the company collapses into insolvency (a la G.Network).
In CityFibre’s case, the equity backers (Goldman Sachs, Mubadala, etc.) are already grasping onto junk shares, but they’re willing to inject £900m of fresh capital. The catch? They are telling the banks: “We’ll put in £900m to grow the business, but not to pay off your unsustainable debt.” So the banks are being asked to take a haircut too. (If only you could tell your mortgage lender you’ll only pay back 60% of what you borrowed!)
None of this is pretty, and bank haircuts alone will not solve the fundamental problem with altnets not consolidating.
If the CMA blocks the Netomnia deal as expected, we shouldn’t just stop there. The industry needs a proper, coordinated debt-reset and a mega-consolidation into three genuine national infrastructure players:
1. BT
– Footprint: ~25m premises, ~20m active customers, ~68% market share)
– Status: Business as usual, but maybe some more pressure to bring down the cost of leased lines and Dark Fibre would be an idea for Ofcom – a missed opportunity in the TAR to fix the ridiculous symmetric dragging of feet.
2. VMO2 / nexfibre + Community Fibre + G.Network + MS3
– Footprint: ~20–21m premises, ~6.5m active customers, ~22% market share
– Status: VMO2 wanted Netomnia partly to acquire their knowledge of rapit PON deployment to help swap out their legacy HFC cable network that consumers essentially reject. If the CMA blocks Netomnia, VMO2 should instead acquire Community Fibre and G.Network in London, plus MS3 in Hull. That gives them top-tier full-fibre build expertise (PIA from CommunityFibre, digging from G.Network and stiff competition in Hull) and clean balance sheets, leaving VMO2 to focus its capital purely on upgrading its legacy cable footprint (and fixing its toxic reputation).
3. The UberAltnet (CityFibre + Netomnia + Hyperoptic + Gigaclear + KCOM + Trooli + Freedom Fibre)
– Footprint: ~14–16m premises, ~4.5m active customers, ~15% market share
– Status: Yes, this is essentially a carpet bag of every remaining altnet squished together. Once their respective lenders take their required buzzcuts, they can come to the table. While this group starts smaller than VMO2 in terms of active connections, it is a 100% pure-play FTTP network. No legacy cruft or pensions like BT, no HFC noose like VMO2. With no baggage, its long-term network economics arguably much stronger.
Ofcom dropped the ball (again):
Ofcom isn’t without blame either, as wholesale has proven arguably more important than TOTSCo. Ofcom should mandate a standard, unified wholesale platform and API across all three major network groups and in doing so force all players to wholesale (looking at you, VMO2). Retail ISPs (eg Sky, Vodafone) don’t want the friction or cost of integrating with dozens of different systems.
This setup delivers genuine, sustainable three-way competition. Who wins? Does VMO2 upgrade its HFC and customer service fast enough, or does the Mega-Altnet capture wholesale market share and build faster? That’s the dynamic the CMA and Ofcom should actually be striving for. It’s a hard call to know who’ll succeed even in this – but that’s a fair bet IMO. London will hate not having much choice for XGS-PON but that will be quickly fixed with a new executive team leading Hyperoptic.
Unfortunately there’s no mechanism for govt to force this. And there could’ve been a much better way to roll out FTTP by forcing Openreach to be divested out of BT… but as usual, it’s the banks that are the problem as they always are.
ok you’ve got the job. Just note please that pigeons come home to roost. The thought of a cow up a tree and the consequences of walking beneath is grim 🙂