COMMUNICATIONS group KCOM has sold off all of its national network infrastructure outside its East Yorkshire base for £90m.
CityFibre is a competitor of BT Openreach and provides pure fibre connectivity for use by regional and national service providers and mobile operators. This purchase will add 1,100 route kms to its network in 24 towns and cities plus 1,100 route kms connecting 22 towns and cities as well as key data centres and wholesale internet peering points in London.
It will take ownership of all KCOM Group’s national physical network infrastructure, excluding that in Hull and East Yorkshire.
CityFibre has announced an underwritten share placing of £80m to help fund the “transformational” deal, which it says has accelerated its growth by five to seven years.
The two companies have also agreed a parallel deal which gives KCOM access to the assets for £5m a year for the next five years, while £1m-a-year operational costs will now be borne by CityFibre. KCOM has an option to extend this agreement for up to 15 years.
Bill Halbert, KCOM’s chief executive, said: “Today’s announcement unlocks considerable value in relation to an under-utilised asset, built more than 10 years ago and which is no longer core to our strategy.
“Over the first half of the financial year, there were encouraging signs that our business transformation is starting to deliver results and the proceeds from this transaction offer us the opportunity to accelerate investment in those plans, without the need for any material increase in our indebtedness.”
KCOM said the proceeds will “strengthen significantly the group’s financial position and increase its ability to invest further and continue to transform the group”, while giving shareholders a commitment to dividends over the medium term.
Greg Mesch, chief executive officer of CityFibre, added: “We are pleased to announce this transformational acquisition, which we believe will accelerate our growth target by five to seven years, creating a credible alternative to BT Openreach across the UK. Furthermore, we are delighted to have received the support of our existing shareholders to fund this transaction, and we welcome new shareholders to the register.
“The acquisition of these assets represents a unique opportunity for CityFibre to increase its reach into 21 new markets, and enables this asset to be integrated into CityFibre’s wholesale shared infrastructure model, opening up the use of the network to many users. Following the acquisition, CityFibre will have a national footprint covering 36 cities with abundant fibre capacity for use by national and regional service providers and mobile operators.”
The cash deal is subject to approval by CityFibre shareholders at a meeting on January 12.
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