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CityFibre May Sell Minority Stake to Raise Fibre Rollout Funding

Monday, March 8th, 2021 (5:13 pm) - Score 3,888
cityfibre cable reels optical fibre

CityFibre, which is currently working to deploy their 1Gbps FTTP broadband ISP network to cover 8 million UK premises over the next five years (here and here), has reportedly hired bankers at UBS and Rothschild to help it sell a significant minority stake (worth many hundreds of millions) to a third potential backer.

At present the operator’s on-going £4bn deployment programme is being supported by two primary investors – the West Street Infrastructure Fund (Goldman Sachs) and Antin Infrastructure Fund. The bulk of the funding for that rollout has already been established, but there’s still some that needs to be found and this is one way of finding the necessary cash.

CityFibre has also shown a strong desire to become involved in the UK Government’s new £5bn Gigabit Broadband Programme via the Building Digital UK team, which was highlighted last year by their first deployment into a rural village (here).

The operator is normally much more focused upon commercial deployments in urban areas, but they’ll need more funding if they hope to take a serious slice of the gigabit programme. This wasn’t strictly part of the original plan because the government’s £5bn commitment came after CF had started their rollout to UK cities and large towns.

A CityFibre spokesperson said (Sky News):

“We can confirm that we’re exploring a possible expansion of our shareholder base to support the acceleration of our build and possible participation in the BDUK rural programme.”

The catch in all this is that it often takes several months to put something like this together and by then the new gigabit programme will have already started, although that wouldn’t necessarily stop them from bidding for at least some related contracts while they work on securing more funding. The appetite for investment in fibre still exists, so their chances of success seem good.

As it stands CF has already completed their FTTP roll-out to cover 500,000 premises and they’re on target to reach their first target of 1 million premises (homes and businesses) by the end of 2021, which will be followed by 8 million across 100+ cities and towns (c.30% of the UK) – the latter target is planned to be “substantially completed” by the end of 2025.

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20 Responses
  1. Anthony Goodman says:

    They are doing a superb job in Newcastle. They are well ahead of targets and predictions. I think they are a Godsend myself. Much better at this than Openreach. I wish them well.

    1. Random Precision says:

      Absolutely, they’ve started the build in North Tyneside, can’t wait. Openreach are also rolling out FTTP to, what with Virgin I’m spoiled for choice. Still it’ll be CityFibre and Zen as my ISP of choice.

    2. Ex Telecom Engineer says:

      I’m curious, what makes you say they are “Much better at this than Openreach.”? Openreach are much bigger, employ many more Engineers, and have the technical expertise that comes from decades of supplying communications Infrastructure. The fact is, CityFibre is owned by “the West Street Infrastructure Fund (Goldman Sachs) and Antin Infrastructure Fund”, so it’s likely an opportunist medium term investment for them.
      It’s likely that they’re trying to raise quick cash, to step up rollout during the imminent super deduction taxation period, and to try and supplement the investment with as much Government subsidy they can gain. At least BT/Openreach is British, with publicly traded shares, owned by UK Pension funds and Private Investors, you can’t say the same about CityFibre.

    3. Anthony Goodman says:

      “Openreach are much bigger, employ many more Engineers, and have the technical expertise that comes from decades of supplying communications Infrastructure.”

      And yet compare the speed of Openreach FTTP rollout process to CityFibre. CityFibre had a phase 1 and Phase 2 list of cities. Phase 2 wasn’t set to start until 2021 and end in 2025 but they finished Phase 1 early so started phase 2 early. They have done most of Newcastle now and set to finish it completely way early by the end of 2021 (a Phase 1 timeline when Newcastle was a Phase 2 city set to start in 2021, when in fact its finished then) they’ve started North Tyneside that they recently got the contract for and are set to start Gateshead and Sunderland too they just won the contracts for. The target was these were set to be 2025 when you get these and they are racing through them and likely to be done all three by the end of 2022. This is the same in all of their cities. Openreach by comparison are going at a snales pace.

      When they do install it is the very slow 300mb/s speeds at prices double that of CityFibre who you are getting 900mb/s.

    4. Meadmodj says:

      @Anthony Goodman
      Openreach are currently running at over 170k premises per month (increasing)
      Cityfibre have only just reached 500k which includes acquisition
      OR Fibre First areas are being covered 100% of premises
      Cityfibre are not covering every premise in a given area.
      Cityfibre may have started in their stated targets but progress in many is only selected parts of a location

      Projections for FTTP by 2027 OR will have around 70% of premises and Cityfibre will have around 35% with some overlap in places like Worthing, Brighton, Horsham etc.

      The reality is OR are following a strategic contiguous build. Cityfibre appear to be targeting predominantly grass verge and OH areas to keep their initial costs down and are varying plans as other Altnets turn up.

      All providers will be seeking the Out/In procurement subsidies and may divert investment allocation.

    5. Arbortheus says:

      “Openreach are much bigger, employ many more Engineers, and have the technical expertise”

      And yet all that is a waste of time when you’re trying to deliver broadband over string and tin cans.

      Openreach will go bankrupt if it does not move with the times.

    6. Ex Telecom Engineer says:

      Arbortheus says: “Openreach will go bankrupt if it does not move with the times.”

      Actually the title of this article suggests CityFibre are the one that’s struggling. They obviously don’t want to take the risk of investing more of their own cash in the business, hence looking for more partners. Openreach won’t go bust, because it isn’t an independent company, BT wholly own it. Networks are expensive to build, as well as Fibre in the ground you need sufficient backbone bandwidth, and IP capability. On top of infrastructure you need to run Network Operations and customer service centres. For a Telecommunications company to do well, they need significant scale, but the current competitive environment in the UK must make it really difficult, for new entrants, to recover their initial investment quickly. In addition to all that, much of CityFibre’s network will be built using Openreach PIA, so will incur a regular wholesale rental payment to Openreach.
      It isn’t like we haven’t been here before; This is very reminiscent of the 90’s, when the cable companies eventually went bust and were taken over by Cable & Wireless. BT/Openreach will still be around in 10 years, a lot of the new entrants wont be.

    7. NGA for all says:

      Ex-telecom engineer.. can you explain why BT Group needed subsidy for FTTC in Tyneside?

    8. Ex Telecom Engineer says:

      “Ex-telecom engineer.. can you explain why BT Group needed subsidy for FTTC in Tyneside?”

      Not a clue, but my guess would be that some areas were geographically expensive to supply, so subsidy was given to encourage rollout. FTTC is regulated on wholesale pricing, so other ISP’s benefit too, not just BT/Openreach. The regulatory environment hasn’t encouraged investment by BT, since whatever investment BT makes is to the advantage of other ISP’s. If the regulatory shackles were removed, BT could wipe out much of the competition in short order. The regulatory shackles may be loosened, with the Wholesale Fixed Telecoms Market Review, due to be published this month.

    9. NGA for all says:

      Ec-telecom engineer… Ofcom’s fair bet analysis in 2017 pointed to a 15% + rate of return for FTTC so it is not that.

      Selley indicated they failed to tool up for FTTP which suggests OR was constrained by BT Group.

      It looks a pretty fundamental error which allowed a great many to at least raise money in the space afforded them. These include the some of ex BT managers in charge of taking the subsidy and gaming the costs and capital but now overbuilding what was subsidised at the expense of finishing rural.

      OR looks healthy given it has grown turnover and profit through the pandemic, so more was always appeared possible.

    10. Jamie McGlynn says:

      I have a younger brother who has a symmetrical 100M tariff on their network and he’s very pleased with it and the price point of it.

      In contrast to a few of the other replies here, I see a lot of promise from CityFibre. As with any company, they always start small then they grow from there. They have their foot in the door, and they are still just getting into gear; I think they are going to do quite well and I predict an eventual end to what I think is a postcode lottery. A single hic-cup like this doesn’t mean that disaster will follow.

      I’m on Openreach’s network simply because it’s the *only* provider that was wired to my neighbourhood when the buildings were constructed. I intend to switch when new infrastructures reach my area, as I feel download-favouring technologies just don’t cut it for me anymore.

    11. Ex Telecom Engineer says:

      “These include the some of ex BT managers in charge of taking the subsidy and gaming the costs and capital but now overbuilding what was subsidised at the expense of finishing rural.”

      Don’t understand the comment, but get the gist. Unless BT get a favourable outcome, from the Wholesale Fixed Telecoms Market Review, why would they invest in low return Rural locations? Since Altnets are targeting high density, easy rollout areas, it makes sense for BT to overbuild and compete directly with the Altnets. BT is a publicly listed company, and is heavily regulated to the advantage of other ISP’s utilising BT’s upfront network investment. Without subsidy, rural areas would be left behind, as there wouldn’t be an economic case for any provider to build there. OFCOM need to find a balance between encouraging competition, and allowing BT to profit from its projected £12 Billion FTTP investment. Without OFCOM watching their backs, BT could wipe the floor with all the Altnets. People talk as though the likes of CityFibre are competing on a level playing field, the reality is that BT are having to compete wearing ankle weights. It will be interesting to see where we are in 5 years, I’d bet more on BT/Openreach than I would on CityFibre.

    12. GNewton says:

      @Ex Telecom Engineer: Your overly positive view of BT is understandable, but doesn’t reflect reality. BT, until fairly recently, has been a very backward company, it is more than a decade behind of where it should be because of it’s past “Can’t Do” culture, and acting like a beggar for public taxpayer’s money when as a private company it had no need for it.

      The whole telecoms sector has been wrongly addressed by the government. Private companies are not able to do investments where the ROI is in a distant future. Fibre broadband should be regarded as an essential utility, not as a postcode lottery. But these issues are being simply ignored in this backwards country.

    13. Ex Telecom Engineer says:

      “The whole telecoms sector has been wrongly addressed by the government. Private companies are not able to do investments where the ROI is in a distant future.”

      You might be right, but companies have made decisions not to invest in UK Telecoms, choosing instead to piggy back BT’s network. Vodafone took over Mannesmann in Germany for €190 billion, and recently purchased Liberty cable assets, in the EU, for €18.4 billion. The truth is, various companies could have invested in the UK, and directly competed with BT, but chose to direct investment elsewhere. In many ways OFCOM have stifled outside direct investment, by opening up BT’s network to other providers, and now we are where we are. Many of the Altnets, currently building network, wont reach the scale needed to survive. In the end there will probably be three, or four big players; BT will be one of them, VM/02 another, maybe Vodafone will mop up the Altnets and become the third, time will tell. The reason I listed Vodafone as third is due to them owning the ex Cable & Wireless Worldwide network, and a mobile network, which gives them relevant scale in the UK

    14. HooWoo says:

      I can see CityFibre mopping up some of the altnets too like they did with FibreNation. A lot of them appear to have been founded by their shareholders with a view to being sold on in the medium to long run.

      In terms as a consumer, if you live in a large developed areas, you’re probably going to have access to one of the following by 2025:

      1. Openreach or Virgin Media
      2. Openreach, Virgin Media & CityFibre

      and if you’re really lucky

      3. Openreach, Virgin Media, CityFibre & an another provider like Hyperoptic

      Those in rural areas will sadly just have to be reliant on Openreach and or an Altnet for a fibre connection.

    15. JK says:

      @Meadmodj

      I can assure you that the fibre first rollout isn’t covering 100% of premises. Looking at the map I’m in the middle of a section of fibre first that was completed over a year ago. Every road around me has FTTP except mine. The checker says they have no plans to upgrade my postcode and so do Openreach after I emailed them.

      It wouldn’t be so bad but they have actually laid the fibre down my cul de sac.

    16. Meadmodj says:

      @JK.
      I was referring to the stated aim. OR have a long term objective to cease provision of copper products and PSTN presence in local exchanges (by 2030+ but ideally 2025). Leaving out premises compromises that. However there may still be budget/cost thresholds, engineering or others issues that mean some are not completed on the FF. Less likely in urban but more likely in semi-urban and rural as we progress.

      But it could simply be a Postcode issue i.e the cable and splitters are installed in one postcode but your postcode is not listed against it. I would continue to pursue it.

  2. Anonymous says:

    Oof … calling in the vampires to inject some cash while sucking the blood dry. I’m sure it will end in tears just like when Liberty Global bought Virgin Media.

  3. Disgruntled Contractor. says:

    They seem like a good company to work directly for but not so great when it comes to contractors.
    I have had confirmation from employees that they are told to find fault with work so that payments can be delayed/stopped. This slowly builds up and eventually causes companies to either pull out or go into adminstration. As seen with a couple of companies already and it will happen to others. Very ruthless due to there rapid growth and high costs.

    1. A_Builder says:

      Are the subcontractors submitting the correct contractual notices? If they don’t the main contractor will tend to play it into the long grass.

      They cannot withhold all of the payment for a few defects: they would have to make an assessment of fair value and back that up with a calculation. In general if you have submitted a valuation and an invoice and they disagree with you that have to produce a reasoned Payless Notice. If there is no reasoning or the Payless Notice is not sent out in the proscribed time it is not a valid Payless Notice and the invoice becomes a debt. You are then in a position to do what is, charmingly, known as a Smash and Grab adjudication.

      If they ignore the notices then that is what Adjudication exists for.

      The whole point of Adjudication is to resolve these things in a quick and dirty manner so builds carry on.

      Adjudications are time limited and binding and the Courts tend to enforce them.

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