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Cityfibre’s losses nearly double to £210m

rickyuk

Casual Member
I just seen this article in today’s Telegraph. I hope it’s not gonna start some alpha male style toxic debate. Sharing it because it’s hot off the press and a very interesting read.

A leading challenger to BT has revealed surging losses as rising interest rates pile pressure on its debt-fuelled broadband network rollout.

Cityfibre, which aims to connect 8m homes with fibre-optic cables by 2025, reported an operating loss of £210m for last year, nearly double 2021’s £114m.

[Admin Note: Copy and pasting an entire article from another site is technically copyright theft. I've erased most of the paragraphs and visitors can read the original here: https://www.telegraph.co.uk/busines...nger-cityfibres-losses-nearly-double-to-210m/]
 
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A step in the right direction in my opinion.

“Cityfibre is now considering whether to launch a legal challenge against Ofcom’s decision on competition grounds.”
 
This is probably a silly question but what would happen to the customers if CityFibre go bust? Lets say a customer was on Vodafone CityFibre, would there be a cancellation fee or would they transfer them other to openreach?
 
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Cityfibre will nott be successful in challenging Equinox 2. Even Zen have stated it is not anti competitive and does not under cut Cityfibre wholesale.

City Fibre will be more successful in some areas than others but generally need to get their market share up. The problem they have is their major ISPs are not pushing for conversion from FTTC onto Cityfibre (or OR FTTP). Whilst Talktalk web site provides digital voice guidance their FF products don't appear to offer voice. All this leads me to think Talktalk are happy to sweat their exist LLU for now and both are hesitant to cause either cost to themselves for a FTTP install or customers to review their ISP provider at this time. I think they are also waiting for BT to make the first move re landlines. They know many customers don't like change and FF for the majority of consumers is just that.

Cityfibre are well financed they just need to choose the right locations. The Altnets that are being successful are where they have an associated ISP of their own banging on doors, bus stop advertising etc.

Wholesale has its downside as Openreach are also experiencing
 
This is probably a silly question but what would happen to the customers if CityFibre go bust? Lets say a customer was on Vodafone CityFibre, would there be a cancellation fee or would they transfer them other to openreach?
CityFibre is a wholesaler so I think those that buy their services would step in to keep it going. I can’t imagine heavyweighters like Vodafone or TalkTalk sitting idly doing nothing, letting CityFibre go under.
 
This is probably a silly question but what would happen to the customers if CityFibre go bust? Lets say a customer was on Vodafone CityFibre, would there be a cancellation fee or would they transfer them other to openreach?
Vodafone and the other customers of the CityFibre network would have to decide what to do on a case-by-case basis. There may be a chance for them to purchase parts of CityFibres infrastructure, essentially breaking the company up and selling their assets to their customers to run directly.

Another option would be merging it or selling it to another alt-net. But most of the other ones either already use networks like CityFibre or don't do wholesaling at all like Community Fibre which has chosen to lay its own fibre and operate its own consumer-facing service so CityFibre wouldn't be a good fit for them as they likely wouldn't want to service CityFibres current customers (other ISPs).

I don't think we will see CityFibre themselves get merged with Openreach simply because it's bad for the market and the CMA wouldn't allow that, of course, that's not what you asked, you were looking at it from what the customers of CityFibre (Voda, Toob etc) would choose to do in the event CityFibre went under.

I do think that the CEO of CityFibre is correct in his assertions that consolidation in the alt-net market is going to occur. I feel that Community Fibre will make a purchase or two of some Alt Nets which operate outside of London once they've finished their London rollout which looking at the service map appears to be rapidly approaching.
 
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“Up to 20 potential dance partners” - so about 20% of the entire AltNet market.

I guess this is their play on “the best defence is offence” tac

Grab the popcorn I say.
 
Surely any business in the build stage will run at a loss? Monzo bank a fine one. Revenue will still keep moving forward.

Once the costly builds are done, the sheets will eventually balance and maintenance will eventually cost less than rollout.

Running at a loss short term (on the wider scale they’ve not been around long at all), they’ll be fine.
 
I just seen this article in today’s Telegraph. I hope it’s not gonna start some alpha male style toxic debate. Sharing it because it’s hot off the press and a very interesting read.

A leading challenger to BT has revealed surging losses as rising interest rates pile pressure on its debt-fuelled broadband network rollout.

Cityfibre, which aims to connect 8m homes with fibre-optic cables by 2025, reported an operating loss of £210m for last year, nearly double 2021’s £114m.

[Admin Note: Copy and pasting an entire article from another site is technically copyright theft. I've erased most of the paragraphs and visitors can read the original here: https://www.telegraph.co.uk/busines...nger-cityfibres-losses-nearly-double-to-210m/]
Just by looking at the operating loses it's not good enough to understand the health of a company. Where is the money being spent? How much cash they got left? As the article says Cityfibre is backed by "by Goldman Sachs, is the largest of dozens of insurgent network builders" so that's very strong backing in my view. "Its latest accounts show the cost of financing the company’s debt more than doubled from £24m to £54m" so that's about 1/4 of their losses but consider that "Cityfibre secured £4.9bn in debt financing last June from a consortium of banks and investors to help fund its network build" so they got plenty of cash in the bank.

What I really like to know is how much revenue are they bringing now and how much they expect in 1, 2, and 3 years as more customers join their network. And if they were to stop completely building up their network now, when would they expect to generate profit or break even?

If Cityfibre becomes unviable they will go into administration and their assets sold to the best bidder, investors lossing most if not all their investment. I don't see the big issue here, it's NOT public money. If private businesses fail we still get the benefits of an alternative network to Openreach. And that's got to be a good thing, even if the the BT lovers or the simplistics think it's best to have a single network managed by them.
 
Part of the problem for many of the alt-nets is that they don't appear on the comparison sites unless they enter into a contract with them. And it seems many of them are shy to entertain the upfront and referral fees on the cost of acquiring new customers. So for your average punter who just wants to renew their broadband or start a new service its almost impossible to know the altnets can service your street.
 
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I'm not an accountant, so this goes a bit over my head, but can somebody explain why the Telegraph's figures for operating loss differ from what is actually in Cityfibre's annual accounts?

In my own piece I only used the figures from their annual accounts as I'm not 100% sure where that £210m comes from. The official report puts operating loss at £114.8m for 2022 and £42.3m for 2021.


 
Part of the problem for many of the alt-nets is that they don't appear on the comparison sites unless they enter into a contract with them. And it seems many of them are shy to entertain the upfront and referral fees on the cost of acquiring new customers. So for your average punter who just wants to renew their broadband or start a new service its almost impossible to know the altnets can service your street.
Yeah I agre with you on that, they need more advertising. I remember I got multiple letters in the mail and even 3 door visits when BT upgraded our street to FTTP. The funny thing was that our telegraph pole wasn't part of the initial upgrade so I couldn't sign up. Obviously BT has a much bigger marketing budget and I think Altnets are betting all their cash on network build and customer instalations.
 
I'm not an accountant, so this goes a bit over my head, but can somebody explain why the Telegraph's figures for operating loss differ from what is actually in Cityfibre's annual accounts?

In my own piece I only used the figures from their annual accounts as I'm not 100% sure where that £210m comes from. The official report puts operating loss at £114.8m for 2022 and £42.3m for 2021.


I agree with you Mark, this doesn't look right. I wonder if this is to do with some automated parsing of the full accounts PDF document. The operating loss for 2022 doesn't match but the 2021 doesn't match either. I looked in the PDF trying to fit Telegraph's figures and the best I found is this. On page 5 it says: "Operating loss increased by £72.5 million to an operating loss of £114.8 million (2021: £42.3 million)." and then it says "Loss after tax increased to £219.8 million". Could this be their £210m for 2022 and 2021’s £114m?
 
Part of the problem for many of the alt-nets is that they don't appear on the comparison sites unless they enter into a contract with them. And it seems many of them are shy to entertain the upfront and referral fees on the cost of acquiring new customers. So for your average punter who just wants to renew their broadband or start a new service its almost impossible to know the altnets can service your street.
This is true, but what makes it 100x worse is how secretive they are about premise-level serviceability information... so even if they have an affiliate program (more than you'd think do, of course not all of them), you're still going to have to pay out for a third party to give you their coverage analysis.
 
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Building infrastructure is expensive, I'd assume everybody invested in Cityfibre is interested in getting a return though, so they need Cityfibre to remain a going concern and pick up customers.

I don't think anybody who it would make sense to acquire Cityfibre is big enough to do it, it would be funded by debt and why would investing in that takeover be attractive where investing in Cityfibre isn't? Openreach and Nexfibre don't need another duct network.

What I have found that is quite disappointing is that dealing with Cityfibre is as bad as dealing with Openreach, when a large selling point of Cityfibre was that they are an agile challenger to the big boys. I have two sites in Leicestershire that I look after that are in the areas where they are digging, I email and ask for confirmation that the service is being built to those locations, and to ask if they offer point-to-point services alongside their leased line services, and they just close the ticket out with a message that they don't serve those addresses. I asked the same question via an ISP partner and they didn't have any more luck.
 
I guess similar to recent thread I made, missed this one, not going to to the news article.

But I think Zen's comment is controversial, purely because Ofcom imposed the pricing protection for alt net's to entice them to the market.

For me for Ofcom to say to alt net's we are going to make it attractive for you to invest by regulating the defacto player, and then only part way through rollout move the goal posts is just wrong. It feels like the alt nets were baited in to get Openreach to start a rollout, and now Openreach are full steam ahead Ofcom are slowly resetting things to how they were as they are acting like they would be happy if most places ended up consolidated back to just VM and Openreach.

Also which alt net's are not making a loss? They all relying on either equity or debt investments to fund their operations.

Openreach were quite clever as ultimately the changes will be a free margin boost to all its partners, and as such those partners inevitably told Ofcom they support it.

Its the same as what I told people about the EPG a couple of years back, political promises are only promises, they are often broken, which is what has happened here with Ofcom gradually changing things to suit Openreach.

I am curious if any of VM's current fibre builds clash with any existing CF areas, as given the recent clear funding issues, I am thinking in my head again VMO2CF could end up being a thing. Either that or Vodafone.
 
I’m not really sure in what world is Openreach quite clever. If they had deployed fibre 10 years ago they would be pretty much alone controlling the market. They would have also captured a lot of VM unsatisfied customers which only stay with VM due to lack of other fast internet options. Instead they pushed OFCOM to heavily regulate them and entice the market to create the Altnets.

There is one thing no one seems to get. It doesn’t really matter if all the altnets are losing money or even go bankrupt. First this is not Public money nor it’s Your money so not sure why anyone cares. Secondly all the altnets could go bankrupt but the infrastructure it’s going nowhere. Whether it consolidates into a third big player or not we shall see but to me BT/Openreach made a huge strategic mistake by relaxing and letting others enter their market. Now it’s too late. No matter what happens with the Altnets BT/Openreach is expected to loose about 30-40% of their business when you factor how many more customers they could have when they finish they FTTP upgrade if there were no altnets around. So yes they will still be the biggest player in the market but on percentage they would have been reduced massively.
 
I dont know how you got from their strategy to what they were doing 10 years ago. But anyway if there was no alt nets they would still be rolling out g.fast from the cabinet. Some of us care because we value infrastructure level competition.
 
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