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Alternative network operator CityFibre, which has already built a gigabit-capable full fibre broadband (FTTP) network to cover 4.3 million UK premises (RFS), is reportedly set to sign a £2bn funding deal – reflecting a split of debt and equity – to help keep them in business and support their plans for a major consolidation of rival operators.
The operator’s existing funding is due to run out soon, and thus the operator is keen to reach an agreement on fresh funding before the end of July 2025. Previous reports had indicated that this would reflect a £500m equity financing deal with existing investors (here) and around £1bn of incremental debt funding – roughly enough liquidity to keep them fuelled through to mid-2027 and equity to support their M&A (consolidation) drive.
However, a new report from Bloomberg (credits to Ionide for spotting this) indicates that the proposed deal is also set to include a new “accordion” facility, which will allow CityFibre to tap an additional £500 million under certain conditions – effectively making this agreement worth up to £2bn. Details on what those conditions might reflect are still unclear.
CityFibre currently still aspires to cover up to 8 million UK premises with their new FTTP (XGS-PON) broadband network – representing c.30% of the UK. But their original target of hitting that by the end of 2025 will be missed. The operator has instead shifted their strategy to focus less on build and more on growth via mergers and acquisition (M&A) of alternative networks (e.g. the deals to acquire Connexin [here] and Lit Fibre [here]).
At the same time, the operator remains under the same pressures as many other networks, not least due to high interest rates, rising build costs and competition, which has already impacted some of their commercial deployments. On top of that, one of the operator’s key ISP partners, TalkTalk (accounting for c.150k CityFibre customers), is struggling in ways that could risk wider harm in the future (here).
Despite this, CityFibre’s main shareholders recently said they “remain committed … [to the company’s] long-term success and are actively engaged in supporting the company’s next phase of growth“, while the operator itself claims to be “in a strong position” and “expects to announce details of our financing shortly” (here).
According to a previous note from analyst James Ratzer – in 2025 and beyond, it’s expected that CityFibre will likely only build FTTP out to c.300k homes per annum organically, largely to meet their state aid backed Project Gigabit contracts. But the operator still aspires to add around 1 million premises each year, which suggest c.700,000 will be coming from M&A deals (c.100k – 185k of this in 2025 was covered by the Connexin deal).
The catch is that consolidating alternative networks tends to be a slow, complex and costly process – particularly with many altnets still harbouring an inflated idea of their own asset values. CityFibre’s strategy around this thus remains somewhat unproven, and any new funding deal they strike now will be subject to less favourable conditions than they had before (e.g. interest payments will be higher). Put another way, this may not be the last funding deal they’ll need.