• CityFibre is shaping up to be a thorn in the side of BT Openreach and a real rival to its dominance
• London-based 100% full fibre wholesale operator is going from strength to strength as others, under pressure, begin to fade
• Acquisition of minnow Lit Fibre shows there is room in the UK for an independent, carrier-neutral, competitive, wholesale fibre digital infrastructure player
• CityFibre already has considerable experience in effective M&A, with more planned
• Integration of Lit Fibre assets will be completed by the year end

UK wholesale fibre access network operator CityFibre is going from strength to strength with the news it has acquired Lit Fibre’s network from US investment firm Newlight Partners for an undisclosed sum. 

The news suggests, once again, that there definitely is room for an independent, carrier-neutral, competitive wholesale fibre digital infrastructure platform provider in Britain to grow and compete with the incumbents, even as the country’s overall FTTX altnet sector starts to consolidate, with smaller, financially stretched and less successful rivals struggling to stay in the race.

CityFibre, never backwards in coming forwards, has determinedly worked towards its goal of reaching 8 million domestic premises, 800,000 businesses and enterprises, 400,000 local authority sites and 250,000 5G access points with its fibre lines. It has grown to become a trusted player by digital service providers (DSPs), ISPs and mobile operators, including Three, Vodafone UK and Zen. 

As TelecomTV recently reported, CityFibre is decidedly bullish that it will break even sometime in the first half of this year, having reported that it had more than 3.2 million ready-for-service connections by the end of 2023, about 1 million more than at the end of 2022. The company hit the £100m revenue mark last year, calling it “a significant milestone for the business as its scaling continues at pace.” 

It hasn’t always been plain sailing though. The company hit some squalls when its operating loss for 2022 came close to trebling year on year to £114.8m, but things have been looking up since then and the operator is currently enjoying some blue-water sailing having followed a policy of pursuing a well-developed pipeline of M&A opportunities, as today’s news confirms. CityFibre has already successfully acquired network assets from the likes of KCOM and Redcentric, as well as Entanet and FibreNation, and has become skilled at rapidly integrating and commercialising acquired assets.

Greg Mesch, CityFibre’s CEO, commented, “Our self-build rollout programme has already delivered more than 3.5 million premises to our partners and we’re excited to accelerate this even faster through targeted acquisitions like Lit Fibre. But competition is not just about scale, it’s about providing partners access to carrier-grade networks that reduce their costs to serve and improve the service experience they can provide their customers.

“The UK market needs a third infrastructure platform of scale to ensure competition matures and that it continues to deliver for consumers and the country. Our acquisition of Lit [Fibre] is a clear demonstration of our intent to establish CityFibre as the core of that third platform,” he added.

Open season of altnet consolidation about to begin?

The purchase of Lit Fibre (which was only established in 2021) will increase CityFibre’s ready-for-service footprint by some 300,000 premises, comprising over 200,000 passed homes and up to 100,000 further premises in planned network rollouts. The acquisition price has not yet been made public, but it’s an all-stock, no-cash deal. However, Sky News has calculated that the value of the acquisition is about £80m – not a vast sum to pay for some very handy and prosperous new territories to exploit. When the deal is done, probably in the second half of this year, Newlight Partners will become a minority shareholder in CityFibre. Incidentally, NewLight was also an early investor in Hyperoptic, another rapidly growing UK full fibre altnet.

Lit Fibre is a vertically integrated altnet that is both a network builder and an ISP (with 9,000 retail broadband customers). Its customer base is mainly in the west of England, including towns in Gloucestershire, Hertfordshire, Wiltshire and Worcestershire with outliers in the East Coast counties of Essex and Suffolk. 

This latest acquisition is but one of a range of mergers and acquisitions that CityFibre claims to have planned over the course of the next couple of years. If its current happy fortunes continue in the same vein, the company stands a very good chance of getting well beyond its 8 million premises target, which would make it the undisputed wholesale competitor to the dominant Openreach, BT’s semi-detached wholesale business arm. Then we’d see some fun.

Lit Fibre’s network employs compatible 10Gbit/s XGS-PON network architecture and its complementary attributes will help accelerate the speed at which it will be assimilated and integrated into CityFibre’s nationwide network. The integration is expected to be complete by the end of 2024 and, thereafter, ISPs and other CityFibre customers will be able to access the same products, pricing and service across the whole of the extended (and extending) footprint.

CityFibre says it will continue with and fully deploy Lit Fibre’s work-in-progress as well as “the majority of its planned network rollouts”, including the 100,000 premises where construction is already underway, by early 2025. Lit Fibre’s network is built exclusively using existing poles and ducts and is relatively inexpensive in terms of cost per premises passed. CityFibre will prioritise Lit’s swift network integration. The full fibre broadband services enjoyed by its customers will not be affected as a result of the transaction. As a wholesale-only operator, CityFibre will explore options for the retail ISP following the integration of the network.

I think we can safely say that today’s news is sufficient to declare that the UK’s altnet consolidation season is upon us. How many will still be standing when it ends?

– Martyn Warwick, Editor in Chief, TelecomTV