Cityfibre doubles customers via Sky deal
The largest independent challenger to BT’s Openreach has almost doubled the number of customers added to its network after striking a wholesale deal with Sky as it looks to raise more capital as early as next year to accelerate its buyout of smaller rivals.
Cityfibre, backed by investors including Goldman Sachs and Mubadala, the Abu Dhabi sovereign wealth fund, connected a record 108,000 customers in the third quarter, taking the total to 730,000 at the end of September.
Third-quarter revenue rose to £43 million, from £34 million a year earlier, which pushed earnings before interest, taxes and other items to £7.6 million from £1.4 million, putting it on course for annual earnings of £30 million. Simon Holden, the new chief executive, said: “We’ve got all the ingredients now to be a real, proper scale disruptor.”
He added that most of the growth in the quarter had come from the deal to supply fibre broadband to Sky’s 5.7 million customers across the UK.
James Ratzer, analyst at New Street Research, said: “Cityfibre is clearly getting great early traction with Sky. This could further accelerate next quarter, which would put more pressure on BT.”
The Sky deal is key to driving penetration rates across Cityfibre’s network and recouping capital invested in laying fibre. But there is no firm commitment from the Comcast-owned conglomerate on how many customers it will place with Cityfibre, Holden noted.
Founded in 2011, Cityfibre is the oldest and biggest of the dozens of alternative networks, or “altnets”, that have sprung up to challenge the dominance of BT’s Openreach and Virgin Media O2. It leases its network to internet providers including TalkTalk, Vodafone and Sky, rather than selling broadband services directly to customers.
The boost to customers has come two months after it secured £2.3 billion in lifeline funding, ending tense negotiations with lenders and shareholders.
Another capital raise is expected towards the end of next year, Holden said, as it works to increase its footprint to eight million households by 2030.
Cityfibre will probably target “midsized” fibre companies with a footprint of less than one million. It has the ability to execute two or three acquisitions of that size over the next 12 months.
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