CityFibre kickstarts M&A-fuelled growth spurt

• CityFibre has grown to become a major fibre-to-the-premises (FTTP) wholesale network operator in the UK
• It has long been expected to play a major role in the consolidation of the UK’s still over-crowded FTTP sector
• It has announced the acquisition of the infrastructure assets of regional fibre network builder Connexin
• Additional acquisition deals are expected to follow 

Major UK fibre-to-the-premises (FTTP) wholesale network operator CityFibre has kickstarted its anticipated M&A-fuelled expansion phase with the acquisition, for an undisclosed sum, of network infrastructure assets from Connexin, which has been building out its network in the city of Hull and surrounding East Riding area of Yorkshire. 

As the two companies do not have overlapping networks, the move will expand CityFibre’s potential footprint by about 185,000 premises: Connexin has already built a fibre access network that passes 80,000 premises with work already underway to pass another 20,000; and CityFibre will take on Connexin’s £58.6m Project Gigabit contract to build fibre network infrastructure that passes 34,000 hard-to-reach premises in Nottinghamshire and West Lincolnshire, a rollout that will “unlock a future expansion to over 50,000 non-subsidised premises in the target regions”, noted CityFibre. That part of the deal means CityFibre now has 10 UK government-funded Project Gigabit contracts to build high-speed broadband infrastructure in areas that might otherwise not attract investment. 

It’s not clear how many of Connexin’s fibre access lines are in active commercial service (TelecomTV is awaiting responses from CityFibre to several questions). 

CityFibre will immediately start integrating the Connexin XGS-PON infrastructure (capable of delivering broadband speeds of up to 10 Gbit/s) into its national network, which already reaches 4.4 million UK premises. That integration process is expected to be completed by the end of this year: CityFibre boasts that it fully integrated the network acquired last year from Lit Fibre in less than nine months. 

While CityFibre is acquiring Connexin’s network infrastructure assets, it is not taking on the company’s service operations: The Connexin team will now become an ISP wholesale customer of CityFibre and, using that relationship, expand its reach across CityFibre’s entire network. As part of that expansion Connexin will “build on its success in internet of things (IoT), including rolling out one of the UK’s largest LoRaWAN (long range wide-area) networks and winning contracts for over 2 million smart water meters,” noted CityFibre.

“We’re thrilled to partner with CityFibre as we focus on our national growth strategy,” stated Connexin CEO Furqan Alamgir. “This partnership will bring the best of our combined expertise to consumers and businesses alike across the UK. The next phase of our growth is tremendously exciting as we accelerate our focus on expanding our smarter home, business, enterprise, public sector and utilities products and services across the UK, enabling these rapidly evolving markets to achieve ambitious goals through adopting smarter technology.”

For CityFibre, which recently reported a (small) annual pre-tax profit for the first time, this move is expected to be just one of a number of M&A deals it strikes this year to expand its network reach: As we reported recently, CityFibre is believed to be in the process of raising new funding to help, in part, with a new expansion phase that will be dominated by M&A investments rather than fresh infrastructure builds, with New Street Research reporting that CityFibre is thought to be in exclusive takeover talks with altnets that, between them, pass 850,000 UK premises with their deployed fibre lines.   

Greg Mesch, CEO of CityFibre, said: “Connexin has built an outstanding network and it’s a brilliant fit for CityFibre. Our mature wholesale model will now bring Hull’s homes and businesses increased choice and access to unrivalled connectivity products, services and prices. After our rapid integration of Lit Fibre’s network, we have demonstrated that this is an effective way to expand our footprint and we look forward to playing an active role in the sector’s accelerating consolidation in 2025. Given our major role in the government’s Project Gigabit rollout, we are also pleased to take on a further contract, delivering next-generation digital infrastructure for more hard-to-reach rural communities across Nottingham and West Lincolnshire,” added the CEO. 

As part of the deal, Patrizia Infrastructure, which acquired Connexin in 2020 at an undisclosed price, becomes a minority shareholder in CityFibre (so it looks like the deal was stock- rather than cash-based). “We’re delighted to be joining as CityFibre shareholders and to support its continued expansion and success as the UK’s leading full fibre wholesale platform,” stated Phoebe Smith, managing director at Patrizia Infrastructure. “We’re very proud of everything Connexin has achieved, and we look forward to continuing to support its growth as a leading provider of LoRaWAN and IoT infrastructure,” she added.

- Ray Le Maistre, Editorial Director, TelecomTV