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CityFibre Expands UK Empire With £200M Acquisition

UK wholesale fiber access network altnet CityFibre is acquiring TalkTalk's FibreNation unit for £200 million, a move that expands its planned rollout from 5 million premises to 8 million and heaps additional pressure on Openreach, the semi-autonomous access unit of BT Group.

FibreNation had been seeking some kind of investment for the past year or so, with CityFibre identified last summer as a potential acquirer.

Now with greater political certainty in the UK, CityFibre has made its move, executing what is expected to be the first of many consolidating moves in a UK fiber access market that is teeming with newcomers.

The deal, which requires TalkTalk shareholder approval, will give CityFibre greater scale and make it more attractive to wholesale customers, the number of which is likely to grow as the importance of fiber access network assets to 5G service strategies of all kinds becomes increasingly obvious. Indeed, the proposed deal to buy FibreNation includes a commitment from TalkTalk to be a major user of CityFibre's networks (still in construction) for its residential and business service delivery.

FibreNation was formed in 2018 with plans to pass 3 million homes and businesses. It already has commercial network operations in York, over which TalkTalk is offering high-speed services, and construction projects underway in several other locations.

CityFibre also announced today an amended agreement with major anchor tenant customer Vodafone, which will allow CityFibre to make its wholesale network available to other service providers "sooner than planned." As anchor tenant, Vodafone is already offering fixed broadband service over CityFibre infrastructure in 11 locations, the most recent launch being in Cambridge.

CityFibre was itself acquired in June 2018 for £538 million ($702 million) by a Goldman Sachs-managed fund, and subsequently unveiled plans to invest £2.5 billion ($3.2 billion) in UK fiber infrastructure in a bid to provide a meaningful wholesale broadband network alternative to Openreach.

In response, Openreach has in the past few years finally started investing in fiber-to-the-home (FTTH) lines in a meaningful way and now has plans to pass 4 million properties by March 2021, saying it will pump even more capex into access fiber if the regulatory conditions were more favorable.

What's clear, though, is that Openreach has only acted in any meaningful way in terms of FTTH deployments since CityFibre gave it a competitive kick in the pants and today's acquisition announcement is the equivalent of a jab to the kidneys.

— Ray Le Maistre, Editor-in-Chief, Light Reading

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