CityFibre Shareholders Aim to Raise £900m to Boost UK FTTP Broadband Consolidation
The largest alternative full fibre broadband network in the United Kingdom, CityFibre, which has already built their fibre lines to cover 4.7 million UK premises (with 1m customers connected), is reportedly working with shareholders to raise around £900m to boost their future network expansion and consolidation strategy.
The operator has so far had a bit of a mixed year. On the one hand the take-up of their network has been given a significant boost by the addition of major UK ISP Sky Broadband to their wholesale network and last year they reached a crucial UK funding agreement worth £2.3bn (mix of debt and equity), which was partly intended to fuel future consolidation.
On the other hand, they’ve been having to make more workers redundant (here) and recently lost out to VMO2 and nexfibre’s parents on a significant merger deal with Netomnia (here). Suffice to say that their long-held plans for wider market M&A (consolidation) activity have perhaps been going a bit slower than originally planned and, at the same time, they’ve still got debts to manage.
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According to a new report on Bloomberg (paywall), CityFibre’s existing shareholders are currently working on a plan to raise around £900m in new equity financing, which is intended to give the operator a larger pot by which to secure significant acquisitions in the alternative network space to help grow more scale.
A CityFibre spokesperson told ISPreview:
“CityFibre continues to make strong operational progress, with over one million connections driving profitable growth across our nationwide network. Our shareholders are proposing a substantial equity investment to support M&A, as we explore the right capital structure to rapidly expand to more than 8 million premises and establish the third national network that this country needs.”
At present CityFibre are known to have held discussions with a number of alternative networks, although the extra funding could give them the money to do deals with operators like CommunityFibre, Hyperoptic, G.Network, Gigaclear or potentially several smaller altnets. But unlike VMO2/nexfibre, they’ll be much more sensitive to overbuild and will want to pick players that don’t compete too directly with their existing infrastructure.
However, consolidating alternative networks still tends to be a slow, complex and costly process – particularly with many altnets often continuing to hold an inflated idea of their own asset values. CityFibre’s strategy around all this remains somewhat unproven, but they’ll probably be looking for deals to help replace the sort of scale that an agreement with Netomnia might have otherwise delivered.
Such a funding raise may thus increase the chances of the current market being able to produce at least three large-scale digital fixed infrastructure competitors, as opposed to being allowed to gradually devolve back into more of a duopoly state between Openreach and VMO2/nexfibre.
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Lest we forget that CityFibre was one of the one of the key reasons why established giants, like Openreach (BT) and Virgin Media (O2), have had to accelerate their own FTTP plans in order to avoid losing too much market share.
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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CF just needs to sell,
It’s only a year since they had a £2.3bn refinancing deal that was supposed to drive consolidation. I don’t seem to remember many acquisitions in the last year. Lots of talk but little action.
Here’s a crazy idea, instead of sitting on billions and doing nothing, why not use some of it to finish some of the cities they started building in. Those engineers could be building instead of looking at redundancy
CF’s main problem is that many of the obvious targets have better profitability than they do. Those altnets may not want to accept the kind of deals that CF can afford.
I can see all these Alt nets someday will merge into one or two companies. it’s just like the cable companies of the 90s that NTL and Telewest gobbled up then merged they merged into one,
You mean like Liberty Global is doing right now? Yup
Good money… Bad money…
Lest we forget that CityFibre was one of the one of the key reasons why established giants, like Openreach (BT) and Virgin Media (O2), have had to accelerate their own FTTP plans
Sounds about right, Openreach would still be keeping hold of FTTC if they did not have competition. They would change eventually, when bits start falling apart and become to costly.
I still say it was Zzoomm that got Openreach to move their backside here. Looked on their site, and they had no plans and then as soon as Zzoomm said they were coming Openreach had plans.
Competition is good, just sometimes it is not fair competition.
Another day, another £Billion.
The growing turbulence in the debt markets may well be driving several of the AltNets to the wall. In such circumstances, there will be some bite-sized opportunities to acquire one or two of the zombie businesses. It might be beneficial for the businesses to wait until these businesses collapse in order to negotiate better prices, but that can also be risky.
If Ofcom was really committed to growing open competition within the sector, it would be bringing forth regulations to ensure that the various AltNets had sustainable business models.
Rather than allowing them to continue relying on a stream of debt-driven funding to maintain their place in the market, the businesses should be required to establish sustainable business models.
The funding, in the main, originates from overseas private equity funds, which are now themselves, in many cases, likely at risk of default in view of the growing turbulence across the various financial markets.
This is a notable failure on the part of Ofcom. The impact is that businesses operating under responsible business models are being undermined by chancers, with the added risk that AltNets will simply cease services as they collapse.
Ofcom might want instead to look at requiring the various AltNets to start charging wholesale prices that are in line with their true cost bases. This would hit consumers of their services, but we can not continue indefinitely with allowing significant players in the sector to trade upon wishful thinking, especially so given that the roll-out of fibre is nearing completion.
Ofcom should have built a competitive framework that prevented wasteful and messy overbuild. It could have been a lightweight, smaller, faster version of BDUK process.
– Operators bid for an exclusive licence to claim a ‘lot’ (a few thousand homes, small enough to make a difference).
– 6 months after winning, they have to have spades in the ground
– 12 months later, they have to have % homes RFS
– If they fail at either of these steps, another operator can take the licence and start to overbuild.
– To be eligible, all operators have to have a wholesale model and, ideally, build to a standardised design.
That would have created incentive to actually build what they said they would. It would have been competitive and innovative as even OR couldn’t attack all of the country at the same time. Licensing could even have been priced to reflect the ease of build (urban areas cost more, rural ones priced lower or even subsidised by the urban licences).