UK alternative network provider CityFibre could be about to gain two more shareholders, according to reports from the financial press.

The Wall Street Journal and the Financial Times reported that Mubadala Investment Company, an Abu Dhabi sovereign wealth fund, and Interogo Holding, the investment arm of the group that owns the Ikea franchise, are poised to take stakes in CityFibre in a deal that would value it at about £2 billion (US$2.7 billion).

However, it was also reported that this valuation of CityFibre has come in lower than expected by some, which in turn caused shares in fiber rival BT to fall to the bottom of the FTSE 100.

The FT report, citing unidentified sources, said the two funds are close to investing £1 billion ($1.37 billion) of new equity in CityFibre. The funds are also reportedly among several investors in talks to provide £500 million ($686 million) of debt financing to the London-based fiber provider. According to the Wall Street Journal, the financing talks could lead to an agreement next month.

CityFibre declined to comment on the reports.

CityFibre is currently owned by West Street Infrastructure Partners, a fund managed by Goldman Sachs, and Antin Infrastructure Partners, which each hold a 35% stake. It was reported in May that the company was close to selling a £1 billion stake to fund its continued expansion. CityFibre CEO Greg Mesch said at the time that his company was in talks with 20 pension funds and infrastructure funds from the UK, North America, mainland Europe and Australia.

Fiber challenge

CityFibre is the largest of the alternative networks in the UK. It plans to invest around £4 billion ($5.48 billion) in a fiber network that is expected to be largely completed by 2025 and aims to address around a third of the UK market, including up to 8 million homes, 800,000 businesses, 400,000 public sector sites and 250,000 5G access points.

In March this year, the provider said its network had passed about 650,000 homes. CityFibre's strategic partners are Vodafone UK, TalkTalk and ZenInternet, which provide consumer services using the CityFibre network. Its 11 other ISP partners include Air Broadband, Highnet, Triangle Networks, Trunk Networks, Giganet, Quickline and Purebroadband.

CityFibre considerably upped its ambitions in 2020, increasing its target coverage from 5 million homes to up to 8 million homes. It said it had established "live services" in 17 cities by the end of last year.

The company also acquired TalkTalk's fiber infrastructure company, FibreNation, and appointed Bechtel to help with its network build program.

CityFibre said it ended 2020 with more than twice the number of connections sold on its network at 25,158 compared with the previous year. Group turnover increased 9% to £63.1 million ($86.57 million), although adjusted EBITDA loss increased to £30 million ($41 million), reflecting the network investment.

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