CityFibre profit shows scale of challenge for UK fibre buildersCityFibre profit shows scale of challenge for UK fibre builders

The wholesale fibre network operator posted EBITDA of £5 million for full-year 2024, having turned around an earnings deficit that has numbered in the tens of millions for the past few years; in 2023, its EBITDA was a negative £55 million.

CityFibre has invested heavily in its network footprint since it was founded 14 years ago. Its topline has looked healthy for some time – it reported 34% growth in revenue to £134 million last year – but pushing earnings up into the black was more of a challenge.

As it will be for the myriad rival network builders in the UK, who will doubtless have read CityFibre's results announcement with interest. If it has taken CityFibre, with its fully-funded rollout plan and significant scale – it has the third biggest footprint in the UK after BT's Openreach and Virgin Media O2 – this long to reach profitability, what chance have they to hit that same target?

For many, there's an exit plan in M&A. We are in the midst of a fibre consolidation wave in the UK, that most recently saw Zzoomm and FullFibre agree to merge, with a view to the merged entity being better placed to take part in more mergers and acquisitions in short order.

Other recent tie-ups have included Virgin Media O2's acquisition of Upp and the combination of Netomnia and Brsk, to name a couple, while CityFibre has also dabbled in M&A on more than one occasion in recent years.

The May 2024 acquisition of Lit Fibre added 280,000 premises to CityFibre's footprint and around 10,000 retail customers. That, plus organic growth and participation the government's Project Gigabit programme, helped push CityFibre's overall ready for service (RFS) footprint up by 900,000 last year to reach 4.1 million by year-end. That means it has crossed the halfway point to its target of 8 million homes passed, although the operator is still being cagey with regard to when it aims to hit that milestone.

Customer connections exceeded the half million mark – 518,000, to be precise – at the end of last year on the back of 181,000 net adds.

That end customer base should get a boost when CityFibre makes its network available to Sky. The pair inked a deal last summer that will enable Sky customers to connect via the CityFibre network, a deal that almost doubles CityFibre's addressable market for consumer Internet. CityFibre is "on track" to start connecting those customers this year, it said.

"2024 was a definitive year for CityFibre. We achieved our first full year of profitability, signed a new strategic partnership with Sky, which doubled our retail sales capacity, and solidified our position as the UK's leading independent wholesale network," said company CEO Greg Mesch.

"As we look ahead to 2025 and beyond, we are confident in delivering accelerated, profitable growth across our expanding platform, with half the UK broadband market now served by our partners. We will also harness our increased participation in government's Project Gigabit and make the most of a rapidly emerging altnet consolidation opportunity, realising the benefits of infrastructure competition for consumers, businesses and for the UK."

And just in case it there was any doubt about what making the most of consolidation actually means, CityFibre clarified its plans.

"CityFibre will continue to participate in the consolidation of the sector into a sustainable third, national network," it said.

As a profitable player with a large footprint, CityFibre is in a strong position to swallow up rival fibre builders that might be struggling with rising inflation rates, the increased cost of capital and market competition, including the threat of overbuild.

CityFibre's scaling up plan is someone else's exit strategy.