CityFibre has secured £2.3B in new funding to expand its full-fiber network, drive M&A activity, consolidate the UK altnet market, and strengthen its position as Openreach’s main challenger.
In sum – what to know:
Funding boost – new financing includes £500m in new equity and £960m in expanded debt, with a further £800m accordion facility for M&A.
Consolidation play – backed by major investors, CityFibre aims to lead altnet market consolidation and connect millions more premises.
National impact – supports UK economic growth and digital infrastructure goals, welcomed by government as a model for future investment.
UK-based fibre network provider CityFibre, a rival to BT Group’s incumbent Openreach division, has agreed a major £2.3bn financing round, including £500 million in new equity from existing shareholders and a £960 million expansion of its existing debt facilities. As well, it has access to a new £800 million accordion facility to drive its planned merger and acquisition (M&A) activity – to consolidate the fragmented alternative-network (‘altnet’) market in the UK.
CityFibre builds and operates its own full-fibre (FTTP) network infrastructure in the UK, as an alternative infrastructure (‘altnet’) provider to Openreach. It has a reputation for targeting underserved towns and cities in the UK, as a challenge to Openreach’s fibre and Virgin Media’s fibre/coaxial-cable offering. Like Openreach, it runs a wholesale model, going to internet service providers, rather than directly to enterprises and consumers.
It serves Vodafone and TalkTalk, ZenInternet, among other national and regional providers. In the last 12 months, it has announced its first full year of profitability, and also supported Sky’s launch of full fibre and Gigafast+ services, completed the integration of Lit Fibre, and announced the acquisition of Connexin’s full fibre infrastructure. It claims its network reaches more than 4.5 million premises; it has a stated target to reach eight million UK premises.
Shareholders include Infrastructure at Goldman Sachs Alternatives, Antin Infrastructure Partners, Mubadala Investment Company, and Interogo Holding. Their £500 million boost “underscores” their commitment to its strategy around expanding critical UK infrastructure. The debt expansion is supported by ABN AMRO, BBVA, Crédit Agricole CIB, ING, Intesa Sanpaolo IMI CIB, Lloyds, the National Wealth Fund, NatWest, SEB, and Société Générale.
This £960 million facility will support network investment to “rapidly connect hundreds of thousands of new customers”. The additional £800 million accordion facility is for acquisitions – to “finance the company’s M&A pipeline and cement its position as the sector consolidator”, it stated. A statement talked about its ambition to “provide the digital foundations for the UK’s economic growth for decades to come”.
Greg Mesch, chief executive at CityFibre, said: “This financing will supercharge CityFibre’s next phase of growth, as we consolidate the altnet sector, accelerate the pace of customer connections and unleash the full power of our market-leading 10Gb XGS-PON network, for the benefit of all our partners, their customers and for the UK economy… This multi-billion-pound investment into critical digital infrastructure will deliver significant benefits across the UK, helping to realise potential and unlocking economic growth.”
The funding was greeted by the government. Rachel Reeves, Chancellor of the Exchequer, said: “[This] shows Britain is attracting billions of pounds of investment, including through the National Wealth Fund, driving growth across British businesses. Investing in our digital infrastructure is key to ensuring our economy is fit for the future. Through our Plan for Change we’re growing the economy by boosting investment in Britain and working hand in hand with businesses to create jobs, to put more money in working people’s pockets.”
Secretary of State for Technology, Peter Kyle said: “This investment in CityFibre is welcome news. It’s proof our telecoms industry is driving investment into the UK, as well as building the digital foundations that will serve generations to come. The success of the UK’s network providers will help accelerate the rollout of gigabit-capable broadband to millions of homes and businesses across the country. I hope to see even more success stories like this one, because this sector is critical not just to improving internet speeds, but to transforming quality of life for communities and creating opportunities in every part of the country as part of our Plan for Change.”
