CityFibre raising £200m as it expands to residential service

The AIM-traded company said it also intended to raise further gross proceeds of up to £15m through a non-underwritten offer for subscription.

It said it was “pleased with the support” of its new and existing shareholders, including Woodford Investment Management, which agreed to subscribe for 65,454,545 shares in the firm placing for a total consideration of £36m.

“We are building ‘Gigabit Britain’, driven by growing demand from internet service providers and their customers to switch to full-fibre infrastructure,” said CityFibre CEO Greg Mesch.

“Our announcement to enter the residential market is the first step in our vision to bring gigabit connectivity to millions of UK homes and small businesses.”

The net proceeds of the placing and the offer for subscription would be used to fund the growth of the company's full fibre network in the UK, including the expansion of CityFibre's fibre metro networks from 42 UK towns and cities today to not less than 50 towns and cities by 2020.

It would also be used for the start of construction of fibre to the home (FTTH), addressing the residential market, in five to ten UK towns and cities during 2018, and also for the acquisition of Entanet International - a provider of wholesale communications services - for a consideration of £29m in cash.

That acquisition would support of the company's strategy to focus on wholesale fibre services and accelerate the commercialisation of CityFibre's fibre assets, the board explained.

“Growth in data traffic is driving demand for investment in digital communications infrastructure and particularly in fibre optic broadband networks,” the CityFibre board explained in its statement.

“The UK has one of the highest levels of internet adoption in the world, but lags behind nearly all OECD nations in terms of fibre infrastructure.

“Recent UK government and regulatory policy for greater competition and investment has resulted in a promising pipeline of projects for which CityFibre, as a builder and wholesaler of full fibre infrastructure, is well positioned.”

Greg Mesch said the announcement was “about more than just better broadband”, saying the company’s aim was to future-proof the digital infrastructure the UK relied on at work, at school, at home and in communities.

“It's also about stimulating the market, creating jobs and growth,” he explained, adding: “the government and Ofcom recognise that investment in alternative fibre networks will catalyse growth in the UK's digital economy as well as reduce the country's reliance on BT Openreach.

Mesch said that with Entanet now part of the CityFibre “family”, the group’s combined offering would accelerate the take-up of services over its growing network footprints, leveraging Entanet's “enviable” channel partner network and continuing to transform digital connectivity for “thousands” of UK businesses.

“Today's capital raising also better positions CityFibre to undertake larger projects coming forward with the public sector as well as mobile operators in readiness for their small-cell roll-outs and 5G services.”