CityFibre, the Goldman Sachs-backed telecoms company laying broadband lines around the UK, has secured £4.9bn in debt finance from a consortium of banks and investors, in one of the largest ever financings by a fibre company.
The company said the debt package would fully finance CityFibre’s rollout of fibre infrastructure to 8mn homes across the UK as well as enable it to participate in the UK government’s Project Gigabit scheme to reach rural homes.
The debt raise has been underwritten by NatWest, Société Générale, Crédit Agricole, BBVA, Intesa Sanpaolo, ING and SEB, with ABN Amro, Lloyds Bank and asset manager M&G joining as core lenders.
CityFibre is one of dozens of so-called alternative network providers — or “altnets” — that have been rapidly digging up streets and laying fibre lines across the country, taking advantage of the slow pace at which one-time monopoly BT was upgrading its network from copper.
Over the past two years, as BT and Virgin Media O2 have significantly accelerated their fibre rollout, the battle between these challenger companies and the incumbents has intensified.
BT has now committed to spend £15bn to reach 25mn homes by 2025, while Virgin Media O2 is upgrading its network to reach about 15.5mn premises by the end of 2028 and is seeking investors for a new venture to connect a further 7mn homes.
The question is whether the altnets will be able to build out their networks fast enough and gain enough market share in the locations they are targeting to eventually turn a profit, after years of intense capital expenditure backed by billions from private investors and funds.
“It’s been 11 years of work with CityFibre pulling the whole industry along,” said Greg Mesch, chief executive. “There’s been all this talk about altnets struggling to get money at a time of war and inflation, but we managed to pull it off.”
He added: “You now definitely in one company have the backbone of a third national network.”
The UK Infrastructure Bank, a state-owned investment bank set up to support economic growth in regional and local sectors across Britain, has also committed capital as part of the raise.
The financing follows £1.13bn in equity investments that CityFibre closed in the past 10 months from two new investors, Abu Dhabi’s Mubadala and Switzerland-based Interogo Holding, as well as from existing investors Antin Infrastructure Partners and Goldman Sachs Asset Management’s infrastructure business.
CityFibre is in the process of rolling out its network across 285 cities, towns and villages it identified as underserved by the two incumbent fibre providers. It now aims to extend its network to rural areas that surround these locations, capitalising on subsidies awarded as part of the Project Gigabit programme.
CityFibre has so far passed 1.7mn homes, and has 100,000 customers signed up to its network. It wholesales its superfast broadband to several internet service providers, including Vodafone, TalkTalk and Zen.