Goldman-backed venture close to deal for TalkTalk broadband arm
A takeover of TalkTalk鈥檚 FibreNation by CityFibre could be announced as soon as Friday morning, Sky News understands.
Friday 15 November 2019 07:31, UK
A new ultrafast broadband network backed by Goldman Sachs, the Wall Street bank, is closing in on a deal to take over a rival venture set up by TalkTalk, the FTSE-250 telecoms group.
Sky News has learnt that CityFibre Holdings, which is part-owned by the Wall Street giant, was on Thursday night edging towards an agreement to acquire 100% control of FibreNation.
An agreement could be announced as soon as Friday morning, although sources cautioned that a deal had not been finalised between the two companies.
Other bidders for a major interest in FibreNation, which include Macquarie, the Australian infrastructure investor, are said to remain in contention for a deal if the talks with CityFibre fail to yield a deal.
TalkTalk said on Wednesday that it was delaying its half-year results announcement because of the ongoing negotiations about a deal for its full-fibre network, which it believes can ultimately serve three million British homes.
News of the potentially imminent takeover of FibreNation by CityFibre comes as the Labour Party announced it would nationalise BT Group's broadband infrastructure division, Openreach, in order to provide free broadband to British households by 2030.
Labour put the cost at £20bn - a figure that was dismissed by people close to BT, who argued that it would be double that sum.
One source said that Labour's new broadband policy could derail the TalkTalk deal with a buyer until after next month's general election.
The quest to provide the fastest broadband services has become the subject of intense political scrutiny, with Boris Johnson demanding full-fibre broadband provision to every UK home by 2025.
Announced in February 2018, TalkTalk said it would fund 20% of the new FibreNation venture, with Infracapital, a fund backed by the insurer Prudential, providing the majority of the capital.
However, the discussions with Infracapital stalled amid a dispute over the valuation of TalkTalk's existing full-fibre network in York.
Under CityFibre's proposal, it would take full control of FibreNation, with the telecoms group receiving a cash payment and signing an agreement to be a customer of the business.
CityFibre, which has set a target of connecting five million homes by 2025, has already struck an agreement with Vodafone to be its first ISP customer - parts of which may now have to be dismantled.
Bought by Antin Infrastructure Partners and West Street Infrastructure Partners, a Goldman-managed fund, in June last year, CityFibre has outlined a £2.5bn investment programme to meet its target.
Like other new competitors, CityFibre has been set up to seize market share from Openreach, which now operates on a more arms-length basis from BT.
Liberty Global, the owner of Virgin Media, is in the process of establishing a new joint venture in order to compete in a more expansive way in the broadband market.
A number of smaller players, including Hyperoptic and Gigaclear, have also been set up, leading analysts to question how many of the new companies are likely to be financially successful.
BT, meanwhile, has signalled that it may ultimately cut its dividend in order to fund the huge investment required to accelerate full-fibre broadband provision.
The possible reduction to shareholders' payout will be among the biggest calls made by Philip Jansen, BT's new chief executive.
CityFibre and TalkTalk both declined to comment.