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Cityfibre Says York UK FTTH Broadband Trial Completed and Successful

Monday, September 26th, 2016 (9:44 am) - Score 2,037

Cityfibre has published their full H1 2016 results, which among other things reveals that the joint 940Mbps Fibre-to-the-Home (FTTH) broadband trial with Sky Broadband and TalkTalk in York (England) is now “completed” (14,000 premises passed) and “achieved all target objectives in terms of penetration and deployment costs.” But what comes next?

The original ambition saw Sky and TalkTalk both plough £5 million each into the first phase of the roll-out, which was expected to reach up to 20,000 premises (around a quarter of York’s 80,000 or so premises) and make use of Cityfibre’s existing 103km long fibre optic ring network in the city (The York Core).

According to the last update from TalkTalk in July 2016 (here), the build costs of this network have now been established at below £500 per home passed (this does not include the final home install) and “we are increasingly confident of reaching our targeted penetration rate of 30%‐40% and delivering the proof of concept required to expand beyond York.”

Cityfibre’s H1 2016 Statement

The York FTTH trial with joint venture partners Sky and TalkTalk was substantially completed in the period. Under CityFibre’s proprietary reference design, approximately 11,000 homes were passed by 30 June 2016 and made ready for service, connected by 1,150 kilometres of newly deployed fibre.

One key objective of the trial, to deliver a cost per home passed of below £500, was achieved. Penetration of homes passed at the end of June stood at approximately 11% after only three months of active marketing, well ahead of expectations and a very encouraging indication of likely levels of demand for true FTTH services across the broader UK market.

At present, the network passes approximately 14,000 homes, with over 2,000 taking service, for a penetration rate of 15%. The Board and Management are extremely pleased with the results of the trial, which strongly underlines the potential to deliver an FTTH rollout of up to 4m homes in multiple cities across the CityFibre footprint by leveraging the Group’s existing assets and reference design architecture.

The question now, aside from whether or not the aspiration of 20,000 premises passed will be achieved, is what comes next? The original announcement boasted about an ambition to expand into two further cities, but that announcement never came and Sky’s CEO has recently appeared to back away from the strategy of building their own fibre optic network (here).

Meanwhile TalkTalk’s hope of covering 10 million UK premises would require a major partner in order to help share the financial burden, but so far nobody has come forward. Ofcom’s new Strategic Review proposals, which should make it easier to harness Openreach’s (BT) existing infrastructure, might help but for now TalkTalk’s future FTTH/P strategy appears to be in limbo.

Elsewhere Cityfibre revealed a turnover of £6.6m (up from £2.7m in H1 2015) and a total of 3,490 connected customer premises (up from 1,017), which rises to 3,702 new customer connections if you include those from new contracts that have just been signed.

Cityfibre Results (Highlights)

* New contracts with initial contract value (‘ICV’) of £53.8m added, versus £23.2m for full financial year 2015 and £8.1m in H1 2015.

* Period end cash, cash equivalents, and short term deposits of £18.1m, with net debt of £26.7m.

* £90m acquisition of KCOM’s 2,200km national duct and fibre optic network assets covering 24 cities across the UK closed 18th January 2016.

* Total core metro network route fibre kilometres increased by 232%, to 2,050 (618).

* Acquired, integrated and brought into commercial production 2,200km of fibre and duct assets covering 24 cities and a national long distance network.

* UK ISP relationships rose to 49, from 33 at H1 2015, including new trading relationships with KCOM, Level 3, SSE Enterprise Telecoms, Exa Networks and Gigaclear.

CityFibre claims that its network addresses an estimated 28,000 public sector sites, 7,800 mobile masts, 280,000 businesses and 4 million homes, although it’s important not to confuse their very hypothetical “addressable market” coverage with that of the more practically realistic “premises passed” (Cityfibre’s FTTH/P network has passed a few tens of thousands of homes, NOT millions).

The operator has also stated that it holds a “medium term aspiration” to expand to 50 UK cities by 2020, comprising an “addressable market” of approximately 10,000 mobile cell site locations, 35,000 public sector sites, 350,000 businesses and 5 million homes.

Greg Mesch, CEO of CityFibre, said:

“We have had a very strong six months underpinned by an excellent performance by our commercial and operations teams, in which we have amassed a significant new business pipeline.

In less than three years we have created a highly competitive business underpinned by a dense fibre network across 40 UK cities. Moreover, we’ve completed two transformational projects that demonstrate the future potential direction of the UK fibre market, a dark fibre mobile project (FTTT) with Three and EE and the completion of the trial of gigabit speed Fibre-to-the-Home (FTTH/P) with Sky and TalkTalk.

Our business now sits at the forefront of transforming the UK’s digital infrastructure and remains well placed to capitalise on a number of significant near term commercial opportunities.”

Finally, the operator today announced the completed £5m acquisition of all Redcentric duct and fibre networks (assets totalling at least 137km), which includes £4.5m in long term dark fibre leasing commitments from Redcentric. Adding the Cambridge, Portsmouth and Southampton footprints, CityFibre now has presence in 40 cities, which is up from the previous total of 37.

Fraser Fisher, CEO of Redcentric, said: “This disposal is in line with our strategy of control over our customer affecting core assets while not tying up capital where ownership is unnecessary. We will continue to service customers in Cambridge and Portsmouth exactly as before, and expect to generate additional revenues and network efficiencies over time as a result of our developing relationship with CityFibre.”

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By Mark Jackson
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 Twitter, , Facebook and Linkedin.
Leave a Comment
5 Responses
  1. John Kelly says:

    The land grab in the AltNet market via acquisition continues- who is next and for whom?

    HyperOptic and Community Fibre = mass rollout of social housing and apartment blocks?
    GigaClear being gobbled up by Vodafone to get in to the mass FTTH market?
    ITS and Metronet for hyrid metro networks?
    City Fibre and TTB?

    I suspect lawyers and corporate finance guys are going to be busy.

  2. FibreFred says:

    Will be interesting to see what the response is from talktalk, silence I expect and hope people forget about the 10 million home rollout plan

  3. Paul says:

    The gap between rural + city is becoming even greater…

  4. 125uS says:

    This looks expensive. If they’ve reached half the original target (11,000 versus 20,000) we can maybe assume that half the £10M has been spent. With 2,000 customers, that’s cost £2,500 per customer – and that’s in a city environment.

    Recouping that investment over five years, ignoring interest charges and maintenance and what have you, gives a monthly fee of £41 per customer; and that’s before anyone runs any kind of service over it. £41 a month just pays for the cost of the original install.

    Is the price in York a full reflection of the cost of provision, or is that being written off to allow a price that works in the market to be set, does anyone know?

    I can see why not many people are rushing to build FTTP out to rural areas – how could you do it without going bust? The cost of doing it isn’t supported by the price that people are willing to pay.

    1. FibreFred says:

      There was an article on here not long ago that stated sky were doing deals at rock bottom prices for their York fttp service, just to get someone using it no doubt. It will take forever to recoup the costs.

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