Vodafone nears full-fibre deal with Goldman-backed telecoms group

Vodafone and CityFibre, the Goldman Sachs-backed telecoms company, are on the verge of a new deal that would pave the way for a huge investment in full-fibre lines.

The agreement, which could be announced by the end of the week, would be the catalyst for a slate of new investment by CityFibre that was put on ice after the Labour party’s campaign pledge to nationalise parts of BT and offer free broadband for all.

Labour’s defeat by the Conservatives at this month’s election has had an almost immediate impact in the telecoms sector, ending weeks of fears that a government led by the Labour party could wreak havoc in the competitive telecoms market.

Before the election campaign CityFibre was in discussions to take over TalkTalk’s FibreNation unit, which comprises a fibre network in Yorkshire and a plan to build new lines to 3m homes across the UK to compete with BT’s Openreach.

Under that deal CityFibre’s owners, Goldman Sachs and Antin Infrastructure Fund, would have committed a further £1.5bn to expanding its network to cover 8m homes. TalkTalk and potentially Sky, an original investor on the York network, would have become anchor tenants for Cityfibre’s new network.

However, that was complicated by a 2017 exclusivity deal between Vodafone and CityFibre covering 1m homes, with an option to increase the number to 5m.

A renegotiation of that contract could be signed by the end of the week, according to multiple people with direct knowledge of the situation.

That would allow CityFibre to complete the FibreNation takeover and sign new deals early next year with TalkTalk, Sky and smaller internet providers to use new full-fibre lines in more than 50 cities where it owns infrastructure.

CityFibre declined to comment.