Private equity investors Warburg Pincus and KKR are each assessing potential divestments of their UK broadband fibre businesses, in a move that will test continued investor appetite for the country’s challenged “altnet” sector, according to a report by the Financial Times.
Warburg Pincus has appointed advisers and begun sounding out potential acquirers for Community Fibre, which currently connects around 450,000 customers. Market estimates from New Street Research suggest the London-based operator could be valued at roughly £2bn, with sources describing it as one of the more financially resilient alternative network providers in the UK.
Meanwhile, KKR has also been engaging with prospective buyers regarding Hyperoptic, which serves more than 400,000 customers. Both processes remain exploratory at this stage, with no immediate urgency attached to a transaction, according to people familiar with the discussions.
The potential sale activity comes against a backdrop of growing strain across the UK fibre rollout market. Operators have faced weaker-than-expected customer migration to full-fibre services, alongside significantly higher construction and financing costs, putting pressure on business models across the sector.
The wider market backdrop has also weighed on other players. CityFibre, backed by Goldman Sachs, has been contending with funding pressures, with creditors linked to its £3.7bn net debt reportedly exploring secondary sales of its loans at discounted levels as they assess potential restructuring scenarios. Lenders involved include NatWest and Lloyds Banking Group.
On the demand side for assets such as Community Fibre, some strategic buyers are expected to remain cautious in the near term. Telefónica and Liberty Global — joint owners of Virgin Media O2 — are considered unlikely to pursue acquisitions while they focus on integrating their recently announced purchase of Netomnia.
Industry participants note that consolidation discussions remain active, though not necessarily imminent. Both Warburg Pincus and KKR have previously considered structural combinations of their fibre portfolios, but are not currently under pressure to execute a transaction, according to sources close to the situation. Warburg is also understood to be reviewing its broader strategy for Community Fibre, including its ambition to reach two million connected homes.
Analysts suggest that investor focus has narrowed to higher-quality fibre assets, despite sector-wide challenges. As one New Street Research analyst observed, only selectively attractive networks are likely to command strong buyer interest in the current environment.
Elsewhere in Europe, private equity group 3i Group has effectively written down its investment in German fibre operator DNS:NET after acknowledging a sharp deterioration in financing conditions for rollout businesses. Distressed debt specialist FitzWalter Capital has since been working with creditors to take control of the asset, while also pursuing similar opportunities across the sector, including restructuring activity involving London-based provider G.Network.
