CityFibre faces delays in securing £1.5 billion financing for network expansion

CityFibre, the UK’s largest alternative broadband network provider, is facing challenges in securing the £1.5 billion needed to support its operations and ambitious expansion plans. The company, which has positioned itself as a key rival to BT Openreach and Virgin Media O2, has hit a hurdle as lenders grow increasingly cautious about extending credit to so-called “altnets.”

The financing consists of £1 billion in debt and a £500 million capital injection from shareholders, but prolonged negotiations with lenders are reportedly delaying the process. The tightening lending conditions reflect the impact of rising interest rates and higher operational costs, putting pressure on smaller broadband firms aiming to establish their presence in the market.

CityFibre has been actively seeking new funding since October, following a deal last summer to provide broadband services to Sky’s six million customers. Previously, Sky had relied solely on BT Openreach. To support negotiations, major lenders such as NatWest, Société Générale, and Crédit Agricole have engaged Lazard to lead discussions, while CityFibre has appointed Evercore as its financial adviser.

The company’s latest audited accounts for 2023 reveal concerns about its financial sustainability without additional funding. CityFibre recorded a £285 million pre-tax loss last year, alongside £3.9 billion in debt, although it reported adjusted earnings before taxes and other items of £5 million. At the end of 2023, the company held up to £500 million in cash reserves, which provided some buffer for its operations.

Despite building a fibre network that now reaches over 4.3 million households, CityFibre has only garnered 518,000 customers. Its plans involve connecting eight million premises by 2030, with a shift towards consolidating smaller network providers through share-based acquisitions. Analysts have noted that cumulative losses among altnets totalled £1.3 billion in 2023, signalling broader financial concerns for the industry.

CityFibre, backed by Goldman Sachs and Abu Dhabi’s wealth fund, remains optimistic about its future. A representative from the firm stated that shareholders are committed to accelerating growth and that the company is well-positioned to drive revenue growth by acquiring new customers rapidly. The rollout of broadband services for Sky is expected to significantly enhance CityFibre’s capabilities and market presence going forward.