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CityFibre prepares to enter residential market with £185 million expansion

Construction will begin on a 1Gbps fibre-to-the-home (FTTH) network in between five and 10 UK cities next year, as CityFibre shared its plans for expansion.

In the past, CityFibre has expanded its fibre-to-the-premises (FTTP) network – a competitor to BT’s Openreach – by connecting businesses and public sector sites in cities across the UK (42 at last count, and expected to reach 50 by 2020). However, the residential sector has not been a major focus, aside from some 20,000 homes in Bournemouth and 40,000 in York (a trial with TalkTalk and Sky).

The network expansion, which comes alongside the £29 million acquisition of Entanet, will be funded by a new placing, whereby CityFibre aims to raise a minimum of £185 million; this will be combined with an Offer for Subscription, which could raise up to £15 million.

Plans have also been shared to raise further proceeds through an ‘accelerated bookbuilding process which will be launched immediately following this announcement.’ We expect a prospectus, containing full details, to be published around the 11th July. A related general meeting is then planned for the 27th July.

CityFibre will make an application to the London Stock Exchange for the New Ordinary Shares to be admitted to AIM; it is expected that this Admission will become effective, and dealing in the NOS, will begin on the 28th July.

Greg Mesch, CEO of the company, said that the expansion is “driven by growing demand from Internet Service Providers and their customers to switch to full-fibre infrastructure. Our announcement to enter the residential market is the first step in our vision to bring gigabit connectivity to millions of UK homes and small businesses.”

The news comes on the heels of the Government’s announcement of a £400 million Digital Infrastructure Investment Fund, which helped to inspire the new plan. CityFibre says that ‘advanced negotiations’ are ongoing with ISPs that will market FTTH services to consumers.

That all sounds great, but it should be noted that the actual cities that will benefit from the rollout have not been named, and so we don’t know how many premises will actually be covered by the proposed (important word) expansion – or how long it will take.

It is expected that Virgin Media will pass its full-fibre network to around 2 million premises by 2019, and Openreach by 2020. Alternative network providers (excluding CityFibre) will together achieve a similar figure over the same period. Virgin is unlikely to want to expand much beyond that (in fear of Ofcom designating the company an operator of Significant Market Power, and possibly being required to open up a wholesale solution); but Openreach is getting ready to consult on a project that could see it expanding to 10 million premises by 2025 – with help from rival ISPs and Ofcom.

CityFibre intends to become a viable competitor to Openreach, which it says is “hoodwinking” people into believing that they are getting full fibre, when actually BT is only rolling out fibre-to-the-cabinet (FTTC). Some of the cities that the company currently operates in include Peterborough, Southend, Reading, Cambridge and Stirling.

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