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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  BT Group plc    BT.A   GB0030913577

BT GROUP PLC

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UK's CityFibre buys TalkTalk's York fibre network for 200 million pounds

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01/21/2020 | 07:01am EST
A woman speaks on her phone as she passes a branded logo outside the Talktalk headquarters in London

Britain's TalkTalk has agreed to sell its fibre-to-the-premises (FTPP) network, which has rolled out ultra-fast broadband connections in the northern city of York, to Goldman Sachs-backed CityFibre for 200 million pounds ($260 million).

TalkTalk also agreed a wholesale deal with CityFibre, which will see it switch its residential and business customers to CityFibre's FTTP networks, helping underpin the fibre network operator's expansion.

TalkTalk started laying its own fibre optic cables in York in a trial, initially partnering rival Sky and CityFibre, to challenge BT, the national network operator.

BT has been criticised for dragging its heels in building its own fibre-to-the-premises networks.

TalkTalk rolled the FTTP operation, which has connected 49,000 homes to date, into a new company, FibreNation, in 2018, which has ambitions to build a network serving 3 million premises.

TalkTalk CEO Tristia Harrison, who is focusing the company on low-priced broadband, said it had been working on the deal for a long time.

"We think the value is good, it's more than three times the investment that we've made," she said in an interview.

A deal was delayed late last year when the opposition Labour Party pledged to nationalise BT's Openreach network if it won a December election, a move that would have upended the broadband market. Boris Johnson's Conservatives later won a decisive victory.

TalkTalk's shares were trading 0.5% lower at 114 pence in early trade, as analysts at Jefferies said the deal terms were in line with expectations.

Lazard acted as sole financial adviser to TalkTalk on the deal, which will allow the company to cut its debt load while retaining access to a FTTP network for its customer base.

CityFibre CEO Greg Mesch said buying FibreNation established CityFibre as the UK's third national digital infrastructure platform, behind Openreach and Liberty Global-owned Virgin Media, and a major partner in the government's ambition to roll out FTTP nationwide by 2025.

"The UK is a service-based economy, and this runs best on full fibre," he said. "Ensuring national coverage is critical and this can only be achieved by driving infrastructure competition at scale. This deal demonstrates the appetite from industry to see it established."

CityFibre, which is owned by Antin Infrastructure Partners and Goldman Sachs' West Street Infrastructure Partners, will add FibreNation's ambition of reaching 3 million premises by the middle of the decade to its own 5 million target.

"Five million was roughly 60 towns, 8 million is roughly across 100 towns and cities," Mesch said. "Our investment commitment moves up from 2.5 billion (pounds) to now 4 billion roughly of investment."

Mesch said CityFibre had reworked an existing wholesale agreement with Vodafone to allow CityFibre to open up its networks to other consumer broadband providers sooner than planned.

By Paul Sandle

Stocks mentioned in the article
ChangeLast1st jan.
BT GROUP PLC -0.27% 155.4 Delayed Quote.-19.03%
GOLDMAN SACHS GROUP INC. 1.77% 237.33 Delayed Quote.1.43%
LAZARD LTD 0.24% 42.45 Delayed Quote.5.98%
LIBERTY GLOBAL PLC 2.42% 20.78 Delayed Quote.-10.77%
TALKTALK TELECOM GROUP PLC 1.56% 117 Delayed Quote.-0.78%
VODAFONE GROUP PLC 0.32% 155.8 Delayed Quote.5.82%
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Financials (GBP)
Sales 2020 22 876 M
EBIT 2020 3 620 M
Net income 2020 1 999 M
Debt 2020 17 859 M
Yield 2020 9,91%
P/E ratio 2020 7,68x
P/E ratio 2021 7,47x
EV / Sales2020 1,45x
EV / Sales2021 1,51x
Capitalization 15 247 M
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Last Close Price 155,40  GBp
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