Urban FTTP Builder Cityfibre Added 5,063 New UK Connections in 2016

Fibre optic network developer Cityfibre has today published a preliminary trading update for the year to 31st December 2016, which among other things confirms that they have pure fibre networks in 42 UK “cities” and this reflects 3,383km of network assets in use (up from 743km at the end of 2015).

Much of the scale change seen during 2016 has occurred as a direct result of Cityfibre’s £90m deal to gobble KCOM’s UK network assets (excluding in Hull and East Yorkshire), as well as their £5m acquisition of all Redcentric’s duct and fibre networks (137km of it), which includes £4.5m in long term dark fibre leasing commitments.

Overall the Group added 5,063 new connections during the year, with an initial contract value of £75.5 million (up from 1,100 in 2015 with ICV of £23m) and 58% of those new connections are said to reflect “organic new sales“. Service provider (ISP) relationships also reached 54 at period end, up from 41 at the end of 2015.

On the financial side Cityfibre reported revenue in excess of £15 million and Adjusted EBITDA of approximately £2.5 million, although this has yet to be audited and we won’t get the complete detail until their full year financial results on Tuesday, 25th April 2017.

Greg Mesch, Chief Executive of CityFibre, said:

“2016 was a transformational year for CityFibre. Having started the year with a step change acquisition which significantly scaled our operational footprint across the UK, we followed up by rolling out a commercialization campaign which delivered over 1,700 connections on the acquired assets. The acquisition of the Redcentric network assets in September and further organic development takes our UK city footprint to 42 as we begin 2017.

We are now strongly positioned as the largest wholesale infrastructure provider next to Openreach, which provides us with a great platform for future growth, including significant upsides in Fibre-to-the-Tower and Fibre-to-the-Home.”

It’s interesting to see Greg mention “significant upsides” in Fibre-to-the-Home (FTTH) broadband connectivity because so far we’ve only seen this via their legacy network in Bournemouth (serves about 20,000 premises with very low uptake) and the York deployment with Sky Broadband and TalkTalk, which is aiming to reach 40,000 premises over the next 2 years for an extra £20m (here and here).

The potential certainly exists for more FTTH and Cityfibre’s network provides a useful springboard for that, but actually establishing the support and investment required to go further is still a big challenge; particularly in areas where Openreach (BT) and Virgin Media have an established presence.

Meanwhile Sky has taken a step back from building their own fibre networks and TalkTalk is perhaps a bit too financially constrained to do anything big, although they retain an aspiration towards bringing FTTH/P to 10 million UK premises. But without major ISP support we’re unlikely to see a lot more FTTH via Cityfibre’s network, thus their focus is likely to remain on the public sector and business market.