Labour broadband pledge stalls TalkTalk sale
15 November 2019, 07:26
The Labour Party's pledge to nationalise broadband provision across Britain by 2030 has forced TalkTalk to postpone the sale of its full-fibre infrastructure arm until after next month's general election.
Sky News has learnt that the FTSE-250 company is to delay the signing of a deal to sell FibreNation, which has ambitions of delivering ultrafast broadband to 3m homes, for at least a month.
A deal was on the brink of being signed on Thursday night for FibreNation to be sold to CityFibre Holdings, a venture part-owned by the Wall Street bank Goldman Sachs.
The agreement would have been announced alongside TalkTalk's half-year results on Friday morning.
Instead, TalkTalk said in its earnings announcement that it remained in "ongoing advanced negotiations with interested parties".
CityFibre had been vying with Macquarie, the Australian infrastructure investor, to secure a transaction, but in recent days had edged ahead of its rivals in the race to buy the business.
Labour's announcement that it would nationalise BT Group's broadband infrastructure division, Openreach, has stunned the British telecoms industry, with one trade association, Tech UK, describing it as "a huge setback for the UK's digital economy".
Labour put the cost at £20bn - a figure that was dismissed by people close to BT, who argued that it would be multiples of that sum.
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 5m homes by 2025, has already struck an agreement with Vodafone to be its first ISP customer - parts of which could be unwound if the deal with FibreNation ultimately goes ahead.
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.
(c) Sky News 2019: Labour broadband pledge stalls TalkTalk sale