Abu Dhabi wealth fund poised to take stake in CityFibre

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UK Broadband updates

An Abu Dhabi sovereign wealth fund and a part of the Ikea retail empire are poised to take stakes in the UK telecoms infrastructure group CityFibre in a deal that would value it at about £2bn.

Mubadala Investment Company and Interogo Holding, the investment arm of the group that owns the Ikea franchise, would be the latest investors to tap into alternative UK networks, which are trying to take on the two established operators, BT’s Openreach and Virgin Media.

The two funds are close to injecting £1bn of new equity into Goldman Sachs-backed CityFibre, people briefed on the matter said. They are also among several investors in talks to provide £500m of debt financing to the London-based company.

Dozens of so-called alt-nets are vying to shake-up the UK’s telecoms market, committing billions of pounds to replace ageing copper lines with fibre cables.

They are rushing to capitalise on rising consumer demand for “gigabit” broadband, which is more than 10 times faster than today’s average, and a government push to bring faster connections to more households. Several of the groups are targeting customers in underserved rural areas.

CityFibre is the largest of the alternative networks, with plans to cover up to 8m homes. It has a particular focus on urban centres outside London and already has a presence in Glasgow, Edinburgh, Leeds, Milton Keynes and Peterborough. The company has agreements with TalkTalk and Vodafone, which provide consumer-facing services using the CityFibre network.

The formerly quoted company was bought by Goldman Sachs’ West Street Infrastructure Fund and Antin Infrastructure Partners in 2017.

The financing talks, first reported by the Wall Street Journal, could lead to an agreement next month. Mubadala and Interogo declined to comment.

Mubadala had previously been invested in Hyperoptic, a rival to CityFibre, before KKR bought out the group in 2019. Other operators in the sector include Gigaclear and Community Fibre.

Funds that have invested in the sector include Macquarie, Oaktree Capital Management, Warburg Pincus and the Universities Superannuation Scheme, the largest private pension scheme in the UK.

The intensity of interest in the sector is such that it is compared with the cable boom of the 1980s and 1990s, when operators rushed to take on Sky in pay-TV and BT in telecoms.

Virgin Media is looking for partners to build a new fibre network outside its existing cable infrastructure, while Openreach, BT’s networking division, is planning to invest £15bn to upgrade its copper lines.

Additional reporting by Richard Milne and Simeon Kerr

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