& cplSiteName &

CityFibre Aims High in BT Battle

Iain Morris

At CityFibre's office in London's plush West End, the phones have not stopped ringing since the fiber network operator sealed a £90 million ($131 million) deal for assets owned by KCOM, another infrastructure player, at the start of the year.

"It has felt a bit like being fired out of a cannon," says Will Brayne, CityFibre's head of marketing and communications. (See CityFibre Takes On BT With $136M KCOM Acquisition.)

As arguably the UK's preeminent "gigabit" player, CityFibre is building fiber network infrastructure in some of the UK's biggest cities and towns. The goal is to provide a higher-speed, competitively priced alternative to BT Group plc (NYSE: BT; London: BTA) in various broadband markets. Unlike the UK incumbent, CityFibre does not sell directly to end users, instead partnering with retail operators to serve businesses, public sector organizations and even residential customers. But its wholesale ambitions are lofty. (See CityFibre's Gigabit Vision.)

All-Fiber Diet
CityFibre's Mark Collins speaks during Light Reading's Gigabit Cities event in Munich in late 2015.
CityFibre's Mark Collins speaks during Light Reading's Gigabit Cities event in Munich in late 2015.

Right now, the gulf between BT and CityFibre is similarly vast. In its annual results for the year ending in March, BT's sales had risen to nearly £19 billion ($27.6 billion), and its Openreach access network unit alone generated more than £5 billion ($7.3 billion). CityFibre made just £6.4 million ($9.3 million) in 2015. But the purchase of fiber networks from KCOM Group plc in 24 cities and towns has given the small company a big shove. "This is starting to put us on the map as a national-scale alternative to Openreach," says Mark Collins, CityFibre's director of strategy and public affairs.

Indeed, the KCOM move enlarged CityFibre's "footprint" by 22 cities and towns, with the only network overlaps occurring in Sheffield and York. And since it absorbed KCOM's infrastructure -- a process that was "very easy," according to Collins -- CityFibre has increased that footprint by another two locations to a total of 37 metropolitan areas. Importantly, the transaction also included a long-distance network that has enhanced CityFibre's appeal. "Previously, large providers in multiple cities were saying it's not worth innovating in one city when they had to use BT in others," says Brayne. "This has tipped the balance."

Transformational Acquisition
Source: CityFibre
Source: CityFibre

The £180 million ($261 million) financing package CityFibre raised to fund the KCOM deal should also aid future expansion. Including £80 million ($116 million) in new equity and £100 million ($145 million) in debt facilities, the funding support gives CityFibre the wherewithal to extend its footprint to 50 cities by 2020, according to Collins, compared with a pre-KCOM target of 25 by the end of 2018. Birmingham and Liverpool, where CityFibre is not currently active, are likely to be immediate priorities.

In the meantime, KCOM is delivering a major boost to various performance measures. That is partly because the post-transaction KCOM has become an important "anchor tenant" for CityFibre, selling connectivity services that use CityFibre's infrastructure. Over a five-year period, KCOM business is expected to generate at least £25 million ($36 million) in so-called total contract value (TCV). But CityFibre claims to have signed additional contracts worth £15.7 million ($22.3 million) in the four months since the KCOM deal closed, putting overall TCV at £40.7 million ($59.1 million) so far this year. In 2015, TCV was just £23.2 million ($33.7 million).

Thanks largely to KCOM, CityFibre has also turned a corner on profitability, reporting positive quarterly EBITDA for the first time ever in the January-to-March period (but declining to publish the actual number). Analysts expect revenues will more than double this year, to £14.7 million ($21.3 million), after growing by 68% in 2015. Full-year EBITDA is forecast to reach £2.4 million ($3.5 million), which would mark a considerable improvement on the loss of £2.9 million ($4.2 million) in 2015.

Next page: Risks and rewards

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
User Rank: Lightning
7/18/2016 | 7:01:24 AM
It good to have more players deploying fiber
Virgin Media will enhance the fiber deployment. Sky and TalkTalk have already done some fiber deployment in Youk Shire. BT will increase the fiber deployment. Now with CityFibre, we will see more fibres in UK.
Featured Video
From The Founder
John Chambers is still as passionate about business and innovation as he ever was at Cisco, finds Steve Saunders.
Flash Poll
Upcoming Live Events
September 12, 2018, Los Angeles, CA
September 24-26, 2018, Westin Westminster, Denver
October 9, 2018, The Westin Times Square, New York
October 23, 2018, Georgia World Congress Centre, Atlanta, GA
November 6, 2018, London, United Kingdom
November 7-8, 2018, London, United Kingdom
November 8, 2018, The Montcalm by Marble Arch, London
November 15, 2018, The Westin Times Square, New York
December 4-6, 2018, Lisbon, Portugal
All Upcoming Live Events
Hot Topics
Why Do You Need a 5G Cloud-Native Core?
David Nowoswiat, Nokia, 8/9/2018
Windstream Claims US SD-WAN Leadership
Carol Wilson, Editor-at-large, 8/9/2018
Roku's Free Streams Go Outside the Box
Jeff Baumgartner, Senior Editor, Light Reading, 8/9/2018
Layoffs at Ericsson's iconectiv
Ray Le Maistre, Editor-in-Chief, 8/10/2018
Should Orange Buy Vivendi?
Iain Morris, News Editor, 8/14/2018
Animals with Phones
When Your Cat Hijacks Your Tech Click Here
Live Digital Audio

A CSP's digital transformation involves so much more than technology. Crucial – and often most challenging – is the cultural transformation that goes along with it. As Sigma's Chief Technology Officer, Catherine Michel has extensive experience with technology as she leads the company's entire product portfolio and strategy. But she's also no stranger to merging technology and culture, having taken a company — Tribold — from inception to acquisition (by Sigma in 2013), and she continues to advise service providers on how to drive their own transformations. This impressive female leader and vocal advocate for other women in the industry will join Women in Comms for a live radio show to discuss all things digital transformation, including the cultural transformation that goes along with it.

Like Us on Facebook
Twitter Feed