CityFibre struggles to secure £1.5 billion financing amid market caution

CityFibre, the UK’s largest alternative broadband network provider, is facing challenges in securing £1.5 billion needed for its operations amidst growing lender caution. This situation arises in the context of a broader tightening of credit among alternative network providers, referred to as 'altnets', who emerged in the competitive race to roll out fibre broadband. The company began discussions with potential investors and lenders back in October 2024 after a significant deal with Sky to provide its broadband services was signed last summer. These financing efforts are critical as CityFibre continues to expand its network, which has already been built out to serve over 4.3 million households. However, only 518,000 customers are currently using its services, reflecting the challenges in gaining market traction against established competitors like BT’s Openreach and Virgin Media O2. CityFibre's negotiations involve unlocking £1 billion in debt along with a £500 million capital injection, aimed at overcoming a substantial pre-tax loss of £285 million recorded in 2023 and a total debt of £3.9 billion at that time. Amidst this financial landscape, CityFibre is not only striving for immediate funds but is also shifting its strategic focus towards consolidating smaller network providers rather than the more intensive efforts of expanding its own network infrastructure. Additionally, cumulative losses among the altnets reached £1.3 billion in 2023, signaling ongoing difficulties in achieving profitability within this sector. CityFibre, established in 2011 and backed by major investors like Goldman Sachs and the Abu Dhabi wealth fund, is keen to position itself as a strong contender in the industry. The company's representatives have emphasized that existing shareholders are actively engaged in supporting the latest growth phase. They remain optimistic about their future, particularly with Sky's impending launch across CityFibre’s nationwide network. The financing would not only aid the company in continuing its operations but is also deemed necessary for connecting new customers and fostering significant revenue growth in an increasingly competitive landscape.