CityFibre Completes UK Fibre Broadband Acquisition of Lit Fibre

Gigabit broadband builder CityFibre has today announced the completion of their recent share-based acquisition deal for alternative network provider and UK ISP Lit Fibre (here), which adds another 220,000 premises to their existing full fibre coverage (i.e. a predicted total of c.3.8 million or c.3.5m RFS) – rising to 300k once existing builds complete in 2025.

At present CityFibre’s wider ambition remains to cover up to 8 million UK premises (funded by c.£2.4bn in equity, c.£4.9bn debt and c.£800m of BDUK subsidy) – or around 30% of the UK (here), although it’s unclear precisely when that will now be achieved (it was originally a goal for the end of 2025). But as previously reported, the operator is currently also aspiring to add up to another 1.5-3 million premises through mergers and acquisitions (M&A) over the next couple of years, with Lit Fibre being one of their first targets.

NOTE: Lit Fibre was backed by an unspecified equity investment from Newlight Partners LP and is currently available in Midsomer Norton, Radstock, Redditch, Melksham, Harpenden, Sutton Coldfield, Chippenham, Cirencester, Evesham, Clacton-on-Sea, Bishops Stortford and Sudbury, with installation underway in St Albans, Chelmsford, Welwyn Garden City, Stratford-Upon-Avon and Potters Bar.

CityFibre typically sells packages via various broadband ISPs (e.g. TalkTalk, Vodafone, Zen Internet etc.) and will now, as a result of the Lit Fibre deal (estimated to be valued at around £80m), also be able to cater for premises across 20 towns in Wiltshire, Gloucestershire, Hertfordshire, Worcestershire, Essex and Suffolk.

CityFibre now intends to complete Lit’s work-in-progress deployment, as well as the majority of its planned network rollouts. In total, the network is expected to reach up to 300,000 premises by “early” 2025, which will then be added to CityFibre’s total coverage footprint.

Greg Mesch, Chief Executive Officer at CityFibre, said:

“We’re delighted to have concluded our acquisition and we’d like to welcome everyone at Lit to the CityFibre team. We’re also pleased to welcome Newlight Partners, with their deep understanding of the fibre infrastructure market, as our newest CityFibre shareholders.

“We’ve already been working hard with the great team at Lit to ensure that its network is integrated quickly as our partners are excited to begin marketing over the new footprint. This is a great opportunity for us to hone our integration capabilities as acquisition becomes an increasing accelerant to our 8m plan.”

Joshua Ho-Walker, Partner at Newlight Partners, said:

“We are excited to be CityFibre’s newest shareholder and we look forward to helping bring CityFibre’s market-leading, full-fibre platform to 8m homes in the UK. This acquisition is important recognition for the high-quality business that Lit Fibre built and we are grateful for the Lit Fibre team’s hard work and dedication over the past few years.”

The remaining challenge is in the issue of separating Lit Fibre’s retail ISP business (10,000 customers) from their network side (vertical integration), since CityFibre is normally a wholesale-only provider and won’t want to be competing with their existing retail partners. But for now, Lit Fibre’s brand will be retained, although CityFibre have said that they will “explore options for the retail ISP following the integration of the network.”

Fully integrating Lit Fibre’s network into CityFibre’s is expected to take about 6 months, and officially they probably won’t be able to count this as part of their total coverage until this phase completes. But after that it’s plausible that we may see some divestment of Lit Fibre’s customer base or retail brand to a new owner on the same network.

Newlight Partners has also become a minority shareholder in CityFibre, where they will join major shareholders such as Antin Infrastructure Partners, Goldman Sachs Asset Management, Mubadala Investment Company and Interogo Holding.

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