High-speed broadband builder CityFibre nearing sale of £1bn stake in company as it plots expansion to ramp up pressure on rival BT
High-speed broadband builder CityFibre is nearing the sale of a £1billion stake in the company as it plots an expansion to ramp up pressure on rival BT, The Mail on Sunday can reveal.
CityFibre chief executive Greg Mesch said he is in talks with 20 pension and infrastructure funds from the UK, North America, Europe and Australia about a deal which will help to fund its UK rollout.
His company’s fibre cables are used by customers including TalkTalk and Vodafone. CityFibre is the UK’s third largest telecoms infrastructure firm and the biggest of a string of smaller ‘alternative networks’ challenging BT’s Openreach arm and Virgin Media.
Under pressure: CityFibre is the UK’s third largest telecoms infrastructure firm and the biggest of a string of smaller ‘alternative networks’ challenging BT’s Openreach arm and Virgin Media
Mesch is busy hunting for a partner to join existing shareholders West Street Infrastructure Partners, which is backed by Goldman Sachs, and Antin Infrastructure Partners, which hold 35 per cent each.
A deal for 30 per cent of the company would value CityFibre at about £3billion and is expected to be struck within the next two months. The Ontario Municipal Employees Retirement System is among the bidders vying for the stake.
Mesch said: ‘You’ve got 20 different firms that want to be in fibre infrastructure in the UK. It’s a hot place to be. It’s a great market.’
He is seeking the firepower to increase CityFibre’s presence across the UK. The company is currently operating in 66 cities, towns and villages. It is estimated that 2.5million homes will soon be able to hook up to its services.
The firm is investing £4billion to connect up eight million homes and businesses, covering 30 per cent of the population across 285 locations, by 2025. Mesch said this could be upped to 10million if it was successful in an imminent bid for funding as part of the first phase of the Government’s £5billion Project Gigabit programme to connect one million hard-to-reach homes and businesses.
Mesch said: ‘We’re going faster than we ever have. The pandemic was a plus for us [from a business perspective]. We thought at first it could be a very, very bad thing. But it turned into an accelerator. We were able to build quicker because the pandemic had everybody off the roads – or at least out of the way. And unlike BT and unlike Virgin, we didn’t stop. We remobilised, we recommitted, we went stronger.’
The race to roll out super-fast broadband has been heating up. Prime Minister Boris Johnson has publicly stated his ambition for all UK households to be hooked up to full-fibre.
Johnson met with bosses of Openreach, Virgin Media, CityFibre and TalkTalk last month to discuss Project Gigabit.
Meanwhile, BT has announced that it now aims to connect up 25million homes by 2026 – five million more than its original target. Around 4.6million premises have full-fibre connections.
BT chief Philip Jansen, who this month bought a further £2million of its shares, pledged to create 7,000 jobs as part of the rollout.
Mesch said the announcement did not alter CityFibre’s course. ‘That was already in our plans,’ he said. ‘We think we can get our build rate equal to or greater than BT’s build rate within the next 24 months.’
Mesch is an American who cofounded the business in 2011 and has built it through acquisitions. He claims its services are cheaper and faster than rivals. He argues that its connections will help low income renters to access rapid internet.