U.K. altnet targets residential FTTH deployments in up to 10 locations next year; acquires rival wholesaler Entanet for £29 million.
CityFibre on Tuesday said it will raise up to £200 million by selling new shares in order to accelerate the expansion of its fibre networks.
The U.K. altnet has also agreed to acquire rival wholesaler Entanet for £29 million in cash.
CityFibre said in a statement that net proceeds from the share placement will go towards constructing residential fibre-to-the-home (FTTH) networks in five-to-10 locations in 2018.
"Our announcement to enter the residential market is the first step in our vision to bring Gigabit connectivity to millions of U.K. homes and small businesses," said CityFibre CEO Greg Mesch, in a statement.
The money will also help to fund the expansion of CityFibre’s metro fibre footprint to 50 locations by 2020, up from 42 today. Proceeds will also help to cover the cost of the aforementioned Entanet deal.
"Today’s capital raising also better positions CityFibre to undertake larger projects coming forward with the public sector as well as mobile operators in readiness for their small cell rollouts and 5G services," Mesch said.
A minimum of £185 million of the capital raising will come from the placement of 336.36 million shares, priced at £0.55 per share, to both new and existing institutional investors. Current shareholder Woodford Investment Management has agreed to subscribe to 65.45 million shares for £36 million. The placement is fully underwritten by Citigroup, finnCap, Liberum and Macquarie.
A further £15 million will be raised by offering 27.27 million shares, also priced at £0.55 per share, to certain qualifying shareholders, and is expected to open on or around the 11 July.
Meanwhile, with the acquisition of Entanet, CityFibre strengthens its wholesale capabilities, and gains 1,500 new channel partners, as well as new relationships with service providers. The deal is also expected to generate annual synergies of £3 million within three years.
Entanet has a network spanning from London to Bristol in the south, up to Glasgow and Edinburgh in the north, via major cities including Cardiff, Birmingham, Manchester, Sheffield and Leeds, among others. It offers various wholesale voice and data services, as well as IPVPN and colocation services.
"With Entanet now part of the CityFibre family, our combined offering will accelerate the take-up of services over our growing network footprints, leveraging Entanet’s enviable channel partner network and continuing to transform digital connectivity for thousands of U.K. businesses," Mesch said.
The escalation of CityFibre’s ambitions will exert more pressure on incumbent BT’s networks arm Openreach to ramp up its own full fibre strategy.
If Openreach loses a significant share of the market in lucrative, built up areas, it will be left trying to eke out a living in the more sparsely-populated areas of the country, which are more expensive to service, and generate a smaller return.
Openreach currently aims to deliver a minimum of 100 Mbps to around 12 million premises by 2020, using a combination of fibre-to-the-premises (FTTP) and copper upgrade technologies like G.fast.
However, Openreach CEO Clive Selley is also currently consulting with service providers to gauge their appetite for FTTP. Speaking at Total Telecom’s Connected Britain last month, Selley said the consultation will help him draw up a business case for what could be a sizeable FTTH deployment.