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CityFibre is aiming to double the number of customers on its network to 1mn by the end of the year as the UK telecoms group pushes to secure £1.5bn in financing to sustain itself, according to people familiar with the matter.
The UK’s biggest alternative network provider, or “altnet”, is planning to add about 500,000 subscribers in the coming months through acquisitions and a new deal with Sky, signed last year.
Its growth push comes as the telecoms group, which was founded in 2011 by chief executive Greg Mesch, seeks to raise at least an additional £500mn from existing investors including Goldman Sachs and Abu Dhabi’s sovereign investor Mubadala to help fund the expansion of its network.
CityFibre is also currently trying to secure an additional £1bn in debt from lenders including NatWest and Société Générale, in negotiations that began in October, according to the people familiar with its plans.
Investors and banks have poured money into altnets in recent years as companies race to roll out full fibre to challenge BT’s Openreach and Virgin Media O2. But persuading customers to switch has proved challenging. CityFibre’s network covers 4.3mn homes, but its customer base stands at just 518,000.
Higher interest rates and increased competition have also squeezed the sector, resulting in job cuts and consolidation, and leading to a tougher fundraising environment. Cumulative losses in the sector hit £1.3bn in 2023, according to consultancy Enders.
CityFibre warned in its 2023 accounts, published last year, that it would run out of debt and equity funding by mid-2025, adding that there was a “material uncertainty” over its ability to continue without further external financing.
The company told the Financial Times it was in a “strong position”, however, adding that it generated adjusted earnings before interest, taxes, depreciation and amortisation of £5mn last year.
A spokesperson representing CityFibre’s shareholders said the group remained “committed to CityFibre’s long-term success” and were “actively engaged in supporting the company’s next phase of growth”.
One person familiar with the shareholders’ thinking said the company was expected to receive the £500mn sought from them, with further investment possible depending on future M&A.
But analysts questioned this week whether CityFibre could reach its ambitious customer target, and in particular whether its deal with Sky would yield such strong growth.
Under the agreement, Sky has the option of using CityFibre’s network for its 5.7mn customers, but the broadcaster and telecoms group has not committed to any minimum volumes or customer numbers.
The terms also include minor financial penalties for the company if CityFibre does not connect 8mn homes by 2029, according to two people familiar with the matter.
CityFibre added 181,000 customers last year, and is aiming to increase its customer numbers by acquiring smaller telecoms groups. The people familiar with the company’s thinking said it was hoping to add 150,000 customers through M&A in 2025.
But James Ratzer, analyst at New Street Research, said: “Given the run-rate of [new customer additions] in the past two years has been 160,000 to 180,000 customers, [the targeted] jump up to 480,000 in 2025 seems a big ask.”
Karen Egan, head of telecoms at Enders Analysis, said the target would likely be “reliant on consolidation of a number of smaller altnets”.
CityFibre plans to expand its network to 1mn new homes every year, and is targeting about 70 per cent of that to come from acquisitions this year. However, it has only sealed one deal since 2020 — the £80mn purchase of Lit Fibre.
Egan said its goal to reach 8mn homes by 2029 was a “big ask given the current funding environment . . . Expanding through consolidation is easier from a funding perspective but nonetheless it’s an uncertain path as there hasn’t yet been much appetite for smaller altnets to accept deals,” she added.
Assembly Research founder Matt Howett said: “Consolidation between other altnets, while possible [was] unlikely to significantly move the dial on overall market fortunes.”
CityFibre said its financing would “support our role in consolidating the sector and enable [the company] to connect hundreds of thousands of new customers at pace, delivering significant revenue growth”.
Sky declined to comment.
