CityFibre Closing in on £500m UK FTTP Broadband Funding Deal
Alternative network operator CityFibre, which has so far deployed their 2.5Gbps speed Fibre-to-the-Premises (FTTP) based broadband ISP network to cover 4.3 million UK premises (4.1m RFS), is reportedly close to reaching agreement on a much needed £500m equity financing deal to support its existing roll-out and fuel consolidation.
The alternative network operator currently still aspires to cover up to 8 million UK premises with their new full fibre network (funded by c.£2.4bn in equity, c.£4.9bn debt and c.£865m of BDUK / public subsidy) – representing c.30% of the UK. But their original target of hitting that by around 2025 will not be achieved, and have previously indicated a desire to boost their growth by consolidating many smaller alternative networks.
At the start of 2024 the operator signalled that, over the next two years (i.e. by the start of 2026), merger and acquisition (M&A) activity alone could theoretically add up to 1.5-3 million extra premises to their full fibre network coverage. This is on top of the 1.3m expected to be built as part of their rural focused Project Gigabit contracts. But actually delivering on all this will take a few years.
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However, CityFibre’s consolidation drive has so far only been able to add a single altnet, LitFibre, since early 2024 (here), and last year’s accounts revealed a clear need for fresh funding (here). But securing fresh investment in a climate of high interest rates (i.e. rising debt repayments etc.), rising build costs and strong competition is not an easy task, much as many smaller players have already discovered.
The good news, according to a Sky News report and its sources, is that existing investors including Mubadala are allegedly in talks to provide around £500m in equity financing to the company. The refinancing deal is expected to form part of a wider balance sheet strengthening, which may also include a “substantial new debt-raise” (i.e. the overall value of both equity and debt may well be a lot more than £500m).
As part of this effort, a syndicate of CityFibre’s lenders, which is said to be led by the NatWest Group, this week appointed advisers from Lazard to assist them during talks with the company.
A CityFibre spokesperson said:
“We are financing the business from a position of strength, with the full backing of our shareholders and investors. We look forward to further expansion as we launch [Sky Broadband] across our nationwide footprint later this year.”
The operator, which recently reported having grown their live customer base by 54% in the year to total 518,000 and delivering adjusted EBITDA of £5m (up from -£55m), is expected to finalise the new funding deal in the “coming weeks“. But we also wouldn’t be at all surprised if a deal this big took until Easter or just after Easter to fully complete.
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As above, the funding will enable CityFibre to continue their network expansion and to engage in a new round of consolidation.
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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Deeper and deeper into debt and still no where near hitting their target of 8 million premises by the end of 2025.
At least they’ve stopped spinning the line about ‘first full year of profitability’. I guess they’ve realised everyone knows it isn’t true.
DF never disappoints with the hatred. Perhaps read the article and realise the £500m is equity.
Do you really think they would be able to get additional funding if everything was as bad as you claim?
@Anon, DF like the other Openreach/BT fanboys just want one network and one ISP, they don’t like choice.
Bloated toad have had things their own way for too long, time to get companies in that can do the job properly and at a decent cost.
I know they will cry about BT having all the restrictions, still not stopped them making millions.
Sure as hell gonna need it. Needs some serious work on their backhaul network! Its struggling and thats where the investment is needed
What problems?
CityFibre hand most services off at their local Exchanges, there is no backbone to get to these locations. Any bottlenecks will be down to the ISPs who sell over CityFibre… which is the big benefit of CF being a wholesale operator, different ISPs can deliery different levels of performance at different prices. If you’re having problems with your current ISP, you can move to another one almost overnight.
What Robert says, plus their national network is very new and has a lot of capacity and the ability to add plenty more. They installed a new Ciena platform back in 2021 to connect all their cities together.
https://cityfibre.com/news/cityfibre-launches-first-800-gbps-backbone-ring-as-part-of-a-multi-terabit-national-dwdm-project
Sell more equity to buy more debt with lower penetration rates. Ultimately it means the management team walks away with single digit rather double digit % profit when it’s sold to VM.
lol at you thinking it will get sold to VM
Built on egg shells and a bubble of cheap debt, now asking for people to chuck good money after bad. It’ll all end in tears.
Given the absolute joke of Openreachs symmetrical pricing scheme announced this week. I think more ISPs need to be entering agreements with Cityfibre and pushing for them to become the main broadband provider for the UK (thinking of the likes of Sky when I say that).
Sky are already signed up and launching services on Cityfibre later this year
Need plenty of mergers & acquisitions to scale up then. CF currently have less than a 1/4 of Openreach’s current footprint.
How are CF going to become the main broadband provider at 4.3 million premises passed when BT/Openreach are over 17 million (and building at 4m per year) and VM have similar gigabit coverage?
I don’t understand. I have attended many events where Greg Mesch CEO and their leadership team have repeatedly said that they were fully funded to build to 8m homes passed. Now it turns out they are no where near??? The whole business seems a fantasy.
I also found that strange, claiming they were fully funded, but now needing more money when they’re only just over halfway towards their target of 8 million premises.
Can we really trust what they’re telling us?
The additional finding was likely conditional on meeting targets that CF failed to reach.
£7.3 billion in debt and equity that was supposed to be enough for 8 million premises passed, £865 million in taxpayer funding that’ll be paid when they complete the contracts and they need another £500 million at 4.3 million premises passed. Well over a grand of capital per premises passed spent so far. This is why Sky could extract the deal they did presumably. CityFibre are looking more and more like a cable company which isn’t surprising given they built like one. Anyone else remember when they reckoned they were able to build for £500 a premises digging? Fallen back to making a lot more use of PIA to get to that number. First 2 million must’ve been ridiculously expensive.
Cityfibre said they were fully funded to cover 8 million premises, but ran out of money after only 4 million premises.
Cityfibre said they were making profit, but they didn’t take into account their multi billion pound debt.
Cityfibre told their loyal employees that we’re all in this together, we’ve all got each other’s backs, everything’s fantastic and going to plan, but just weeks later made hundreds of people redundant.
@DF
Cityfibre made £5m EDITDA. The first 3 letters stand for earnings before interest. In accounting terms earnings = profit. So they are 100% correct in what they said.
If you agree or not is irrelevant, they are 100% factually correct.
They have built over 4.3million now and will run out of cash this summer. But investors are happy to keep funding as they have a solid business plan at this point in their build stage.
DF, I assume you’re one of those people who were made redundant?
If you were surely you’d realise they haven’t spent 5 billion and parts of that debt funding only gets released depending on if they hit build targets, uptake,etc.
It’s clear they won’t hit 8million premise doing traditional build and within budget. I assume investors are still backing them to reach 8 million but only via mergers.
Will they use any of this new funding to restart and complete their rollout in Edinburgh?
I reckon it’s for M&A alone. Is there a map anywhere, where you can see an overlay of areas passed per provider?
There sure is:
https://labs.thinkbroadband.com/local/broadband-map
Good luck to them, I hope it goes well, more competition is good, certainly if people want symmetrical broadband, with the price openreach is charging. Just need to do better selling and get people moving their backsides. The problem is, people are lazy and will stick with what they have.
I know, I did it for 9 years and was going to stay for even longer, sometimes we need a good jab up the backside.