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CityFibre squares up to BT after KCOM asset purchase

Fibre operator says it can be 'credible alternative' to BT Openreach after agreeing to buy KCOM's national network infrastructure for £90m

After announcing it had put its national network infrastructure up for sale last month, KCOM Group has found a buyer in the shape of CityFibre.

CityFibre, a fibre network builder and operator, has agreed to stump up £90m in cash for KCOM Group's UK network infrastructure, which comprises - among other things - about 1,100 route kms of metro network assets in 24 towns and cities. It said the deal would enable it to compete with BT Openreach.

The assets involved, which had a net book value of £41.8m as of 30 September, do not include KCOM Group's network assets in its native Hull and East Yorkshire.

In parallel with the transaction, KCOM Group will pay CityFibre £5m a year for certain services to support existing commitments to customer arrangements.

CityFibre chief executive Greg Mesch said the "transformational" acquisition, which will expand its footprint to 36 cities, "will accelerate our growth target by five to seven years, creating a credible alternative to BT Openreach across the UK".

KCOM Group revealed it wanted to shed the assets at the time of its interim results in November, saying a sale would be "consistent with our wider transformation journey". The London-listed firm posted an EBITDA of £37.2m on revenues of £177.9m for the six months ending 30 September.

KCOM Group said the deal will be completed shortly after it is approved at a general meeting by CityFibre shareholders - anticipated to take place by 12 January 2016.

KCOM Group chief executive Bill Halbert said: "Today's announcement unlocks considerable value in relation to an underutilised asset, built more than 10 years ago and which is no longer core to our strategy."

He added: "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."