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CityFibre Plan to Boost UK FTTP Broadband Rollout via Acquisitions UPDATE

Thursday, Nov 4th, 2021 (9:12 am) - Score 3,528
cityfibre fence sign photo

The CEO of CityFibre, Greg Mesch, has revealed that the UK operator is already in “advanced conversations” with rival alternative networks (AltNet), which could see them harness some of their multi-billion investment pot to help grow their gigabit-capable Fibre-to-the-Premises (FTTP) broadband network coverage via acquisitions.

At present the UK market is awash with around a hundred different and independent alternative networks (altnets) like B4RN, CityFibre, Gigaclear, Hyperoptic, CommunityFibre, G.Network and many more (Summary of UK Full Fibre Builds), all of which are busy attracting investment and trying to rollout their own FTTP services.

Some of those players, such as CityFibre, have made a much more significant dent than others. Only yesterday, CityFibre reported that they had covered 1 million UK premises with FTTP (here) and were well on their way to their next goal of 8 million – across 285 cities, towns and villages – by the end of 2025 (here). All of that is being backed by a £4bn investment programme.

However, the market may struggle to sustain so many AltNets, particularly with a good number of those smaller players opting to enter parts of already highly competitive cities and towns. Previous studies (FTIR) have suggested that dense urban areas may be able to sustain 3-4 gigabit-capable broadband networks. But in some areas that model is already being stretched, and it becomes less realistic when looking at smaller towns and villages (we’re starting to see multiple AltNets fighting over some of those too).

On top of that AltNets are facing competitive pressures from other changes, such as Virgin Media’s (VMO2) still tentative plan to launch a wholesale product and expand their FTTP coverage. Not to mention Openreach’s (BT) massive FTTP rollout and their new discount scheme for ISPs. The market’s two biggest players are clearly fighting back to retain their positions, but despite the increasing risk for AltNets, investors have so far been happy to continue throwing billions of pounds at such projects.

Nevertheless, we’ve long predicted that such a market would produce both winners and losers. Typically, larger projects with the strongest backing and plenty of fibre in the ground (e.g. CityFibre), and smaller projects with a highly established base and / or well protected model (e.g. B4RN), may be better able to weather the coming storm. But the inevitable expectation in such a market tends to be one of consolidation.

We are more active on the consolidation level than people may appreciate,” said Greg Mesch, CityFibre’s CEO to The Times (paywall). The operator is currently in “advanced” talks with other AltNets that have a “compatible footprint with ours,” which Greg views as a way to increase their coverage, while at the same time fighting back against VMO2 and BT.

One obvious challenge on this front is that most of the other AltNets in this space have only recently begun to build at any kind of scale, and many of them have yet to create a respectably large footprint. From a value and asset perspective, the only fibre that matters is the fibre in the ground, and not so much the fibre committed through a press release.

In addition, due to the long-term investment commitments that exist alongside many such providers, quite a few of them may have an inflated opinion of their own value – before they’ve actually built enough fibre to justify it. Such things can create problems when trying to strike consolidation deals. Suffice to say, we weren’t expecting too much consolidation for another 1-2 years, but as above – that may be about to change.

On top of that, FTTP networks are not all created equal. There can be significant differences in terms of network setup and hardware choice, which can add a lot of extra cost when attempting to integrate different platforms. CityFibre saw something similar when they spent £206m to acquire the FibreNation project from TalkTalk, and ended up needing to upgrade quite a bit of kit (here).

However, CityFibre are quite well positioned to capitalise on some of the more successful AltNet builds. We suspect they’ll focus on those that have a rapid pace of build and are deploying in areas where they have limited or no pre-existing coverage. On that front, Hyperoptic, G.Network, CommunityFibre, KCOM, Gigaclear, Fibrus, Trooli and WightFibre seem like potential targets. But some of those may not want to sell. Others like VXFIBER (LilaConnect) and FullFibre Limited may also carry some interest.

UPDATE 11th Nov 2021

Reports indicate that CityFibre are in discussions with rival altnet toob, which has nearly completed its own FTTP network across Southampton and is busy building in various other towns.

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Mark-Jackson
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 X (Twitter), Mastodon, Facebook and .
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Comments
14 Responses
  1. Avatar photo occasionally factual says:

    So CityFibre cannot build fast enough and have decided that to get the numbers they will need to buy out smaller companies. Which was always going to happen. But imagine the outcry if BT Group did this.
    CityFibre are not a cuddly anti hero looking after the small man nor the rural communities but a massive corporate body which will use do anything to win and pay a dividend to their mostly overseas shareholders.
    More of our key national infrastructure owned and run by foreign nationals for their own benefit.

    1. Avatar photo Anthony Goodman says:

      You make it sound like they are some evil foreign corporation trying to take over the UK. You are forgetting that nobody in the UK wanted to do this. We are long behind even the likes of Romania in FTTP. It costs a fortune to lay and its a logistics nightmare with a very short avenue of profits and taking decades to come if they do. If a rich foreign company wants to do this I say good on them.

    2. Avatar photo Sheldon says:

      “More of our key national infrastructure owned and run by foreign nationals for their own benefit.”

      So you’re suggesting folks with Cityfibre FTTP connections aren’t benefitting at all? Seriously?

    3. Avatar photo occasionally factual says:

      Yes I’m serious.

      You only have to look at the water industry to see what has happened there with foreign investors taking massive dividends and not replacing/repairing the infrastructure so that we end up with raw sewage being pumped into the rivers and sea. E-coli outbreaks in Kent are a result of this attitude. And this will take years to sort out assuming the water companies divert the dividends into their waste treatment rebuilding plans.

      Same pattern in gas, electricity and trains too.

      So it is not a good idea for key infrastructure to be controlled by foreign companies. Indeed many other countries around the world don’t allow it to happen.

    4. Avatar photo J Man says:

      You are suggesting that the nationality of an owner suddenly impacts on the way they do things.
      As if to suggest that surely every “British” owner of something must be the most upholding member of society and would never do something to line their own pocket?

      Hmm, seems a lot like you are just very anti anybody not of your proud British stock!

  2. Avatar photo Sheldon says:

    Also its rather ironic that no-one bats an eye lid and mentions ‘human rights’ when the UAE’s state owned public investment company – Mubadala – has a stake in Cityfibre. Yet the media is up in arms about Saudi’s PIF stake in Newcastle Utd FC. Faux outrage springs to mind…

    1. Avatar photo Anthony Goodman says:

      Its fake outrage started by the big 6 worried someone else will take over. Only last year they tried to setup their own league for no other reason than controlled dominance. Now Newcastle comes along with owners who could buy everyone of their players without even batting an eyelid. They are worried. Where were all of these concerns when Man City, Sheffield United, Leicester and Wolves were being bought out by similar dodgy outfits

    2. Avatar photo Winston Smith says:

      Didn’t you find the murder of Jamal Khashoggi outrageous?

    3. Avatar photo anonymous says:

      This has diverged from CityFibre growing by acquisition.

  3. Avatar photo Paul says:

    Let’s be honest this is what most smaller Alt Nets are looking for right? They spend money to grow and get the infrastructure in to look appealing to potential buyers.

    Is that not the game?

    1. Avatar photo Bob says:

      Yes that is absolutely the game. The business model for lots of the smaller altnets is to be bought by the likes of CityFibre

  4. Avatar photo A says:

    Wonder who they would be interested in? Gigaclear might be a good choice, their profitability is struggling right now with their high build costs but they are P2P while CF are GPON.

    1. Avatar photo Optical says:

      What about Truespeed,they done parts of Wells,Somerset & quite a few villages in Somerset,they also started in Bath,but haven’t noticed them working lately, but CF is also laying fibre in Bath at quite a rate.

  5. Avatar photo Bob says:

    A 100 companies is a crazy number it needs to come down to single figures. That would reduce costs and speed up the eollout

Comments are closed

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