The strategy of Vodafone UK is to optimize its Capex (capital expenditure) by sourcing the FTTP network that uses fibre-optic cables for its broadband services.
The selection of CityFibre indicates that Vodafone is not looking for the FTTP network being developed by BT-owned Openreach.
Openreach, which will be free from the board decisions of BT, is currently evaluating options to build Fibre-to-the-Premises (FTTP) network across UK targeting its wholesale customers such as Sky, TalkTalk, BT and Vodafone.
Openreach estimates that building FTTP connections for 10 million buildings would cost in the region of £3 billion to £6 billion.
Clive Selley, CEO of Openreach, said: “We believe that under the right conditions, we could build FTTP connections to ten million homes and businesses by the mid-2020s.
Openreach is seeking the support of all UK-based telecom operators to create a successful wholesale model.
CityFibre is the UK’s largest alternative provider of wholesale fibre network infrastructure.
Vodafone will have a period of exclusive rights — predominantly during the build phase of each city network. The deal will bring ultrafast Gigabit-capable full fibre broadband to up to five million UK homes and businesses by 2025.
CityFibre will start construction of the first phase of deployment to one million premises in the first half of 2018 targeting to complete in 2021.
Both parties have the right to extend the commercial terms of this agreement to expand coverage to a further four million homes and businesses by 2025.
The partnership will help to bridge Britain’s fibre gap, bringing Gigabit-capable FTTP connections to households, businesses and public sector sites such as schools, hospitals and GP surgeries, and delivering 50 percent of the UK Government’s target of full fibre to 10 million homes and businesses.
Fibre networks provide backhaul connections required for 5G mobile services from the early 2020s onwards.
Vodafone UK will benefit from a superior product at a lower cost and with better service conditions than the regulated wholesale terms offered by BT, the incumbent operator, for access to its legacy copper telephone line broadband network.
Vodafone UK CEO Nick Jeffery said: “The UK has fallen far behind the rest of the world, trapped by the limited choice available on legacy networks.”
Vodafone is the fastest growing broadband provider in Europe, marketing broadband services to 99 million European homes.
CityFibre CEO Greg Mesch said: “This agreement will unlock the UK’s full fibre future and is a major step forward in delivering our vision for a Gigabit Britain.
CityFibre will build, operate and own this FTTP network, providing wholesale access to Vodafone and other service providers.
Vodafone will start marketing of FTTP services from mid-2018 with the first customers connected towards the end of 2018.
Vodafone has made a minimum volume-based commitment for 10 years which increases over the period to 20 percent of the initial one million premises.
Vodafone has been granted a period of exclusivity, city-by-city, for consumer FTTP, predominately during the construction phase.
The first phase of the agreement encompassing one million homes is estimated by CityFibre to be worth over £500 million over 20 years, assuming that the ten-year 20 percent minimum volume commitment is maintained throughout the subsequent ten years.
Both parties have the right to extend these terms to further roll-outs reaching up to four million additional premises by 2025.