CityFibre Sees Positives From BT-EE Tie-Up Despite Deal Loss

By Rory Gallivan

LONDON--CityFibre Infrastructure Holdings PLC's (CFHL.LN) chief executive officer expects to win more business with EE's rival mobile telecommunications groups if EE's proposed takeover by telecoms giant BT Group PLC (BT.A.LN) goes ahead.

Speaking in an interview with Dow Jones Newswires on Monday, Greg Mesch said that the BT-EE tie up would likely put paid to an agreement CityFibre reached with EE to provide fiber connections to EE's mobile phone masts.

But he added that rival mobile operators such as Vodafone Group PLC (VOD.LN), O2 and Three will now be more keen to use CityFibre's fiber infrastructure rather than that of a direct rival, which BT will be if it takes over EE.

CityFibre, which listed on the London Stock Exchange last year with a plan to install broadband fiber infrastructure in mid-sized U.K. cities, in November announced an agreement to provide underground fiber connections to improve the performance of their mobile phone masts in Hull and later other cities.

But BT last month said that it had agreed terms to buy EE for 12.5 billion pounds ($18.7 billion), a move that will give EE access to BT's fiber infrastructure rather than having to use CityFibre's.

Despite the likely loss of this deal, Mr Mesch said he sees the BT-EE tie-up as more positive than negative for CityFibre as mobile operators will be loath to use the fiber services of BT if it is now a direct competitor.

He was speaking after CityFibre earlier Monday announced a pretax loss of GBP7 million for the year ended December 31, up from a loss of GBP6.2 million the previous year. The company is in the early stages of a plan to overhaul the U.K.'s Internet provision by creating underground infrastructure to rival BT's.

Among its early forays into the market was a joint venture with BT's rivals Sky PLC (SKY.LN) and TalkTalk Telecom Group PLC (TALK.LN) to provide high speed Internet services to homes and businesses in York.

Shares at 1121 GMT, down 2 pence, or 3%, at 66 pence valuing the company at GBP69.2 million.

Write to Rory Gallivan at [e-mail]; Twitter: @RoryGallivan