Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Sky has reiterated its commitment to providing broadband services using CityFibre’s network, as the UK’s largest altnet races to secure £1.5bn of fresh capital.
Sky met lenders to CityFibre last week, including NatWest and ING, to confirm it would be moving some of its customers to CityFibre’s network this year.
Sky has 5.7mn broadband customers. Like a number of rivals, it does not have its own infrastructure but uses BT’s Openreach network. The partnership with CityFibre, which has its own independent broadband network, would allow it to diversify its customer base.
The lenders were seeking reassurance over Sky’s plans ahead of a fundraising where CityFibre is hoping to secure an extra £1bn in debt and £500mn of fresh equity.
At the meeting, Sky reiterated its commitment to the partnership, which was announced in August.
CityFibre, which has £3.9bn of debt, said in its 2023 results that without fresh funds it would run out of cash by mid-2025, having spent heavily to build its network infrastructure.
The deal with Sky is expected to improve the returns CityFibre generates from its network, which has the potential to provide services to more than 4.3mn homes but currently has only 518,000 customers. As an altnet or “alternative network provider” it aims to challenge the UK’s dominant operators, Openreach and Virgin Media.
CityFibre told the Financial Times last month it was in a “strong position”, citing adjusted earnings before interest, taxes, depreciation and amortisation of £5mn in 2024.
It is in talks to raise £500mn of equity from shareholders, which include Abu Dhabi’s sovereign wealth fund, Mubadala.
Two people close to the discussions said the new equity and debt financing would likely be agreed within the next couple of months.
The company, founded in 2011 by chief executive Greg Mesch, is one of several altnets that have been set up to challenge the two main providers. However, higher interest rates have made it more expensive to take on the debt required to build networks.
Matt Howett, founder of consultancy Assembly Research, said the Sky deal was a coup for CityFibre and that securing a large broadband provider was “make or break” for altnets.
Karen Egan, head of telecoms at Enders Analysis, said the extent of Sky’s commitment had previously been unclear. “As such, any indications that they are fully backing CityFibre will be very well received,” she added.
Sky has not signed up to minimum customer number targets, but two people familiar with the deal said tens of thousands of Sky customers could be on CityFibre’s network by the end of May, with full scale rollout expected in the second half of this year.
CityFibre, NatWest, ING and Sky declined to comment.
