CityFibre owners have reportedly held talks with Virgin Media O2 over a potential "rescue deal" as the alternative network provider (altnet) looks to generate cash to build out its fiber network.

The Telegraph has reported that CityFibre's two main investors, the Abu Dhabi sovereign wealth fund Mubadala and Goldman Sachs, have approached Virgin Media O2 in recent months to discuss options for the company. This has included talks over a potential sale.

The Telegraph reports that CityFibre has concerns over meeting a deadline to secure more cash.

Bosses at the company, the UK's largest altnet, warned last year that funding would run out in mid-2025 “in all scenarios."

CityFibre has been pushing to take on the UK's incumbent fiber providers, Openreach and Virgin Media O2.

Founded in 2011, CityFibre is a fiber-only provider. The company's network passes more than 4.3 million premises, according to Mesch, which is slightly behind Virgin Media O2's 6.4 million. Both trail behind Openreach, a subsidiary of BT Group, which has passed around 17 million premises.

The company has been in talks to secure more funding for at least nine months, added the report, which states that lenders have appointed investment bank Lazard to advise them in the talks as they seek a further cash injection from existing shareholders.

CityFibre's situation hasn't been helped by the troubles facing another broadband provider, TalkTalk, which has missed payment deadlines to its key suppliers, including CityFibre.

Around 150,000 TalkTalk customers use CityFibre's network, the equivalent of close to 30 percent of CityFibre's total connections.

CityFibre has dismissed the media reports as "unfounded."

“Any speculation about a potential sale is unfounded. CityFibre is in a strong position and we expect to announce details of our financing shortly, supporting our role in consolidating the sector and accelerating CityFibre’s next phase of growth," said a CityFibre spokesperson. “All shareholders remain committed to CityFibre’s long-term success and are actively engaged in supporting the company’s next phase of growth.”

The company has been on Virgin Media's radar before, notably in 2023, when The Telegraph reported the two companies were in talks for a deal potentially worth up to £3 billion ($4.07bn).

Speaking last year, CityFibre CEO Greg Mesch said that CityFibre would continue to challenge Openreach and Virgin Media's dominance in the market.

"We are the true challenger. The altnets are the true challenger, they spark this industry," said Mesch last September.

"It's not regulation that made Openreach invest like crazy, it's fear. They were scared to death that CityFibre was going to roll out fast, it's the same for Virgin. They're [Virgin Media O2] investing because they're scared we're going to roll out our network across their path, and we're going to provide better service."

Talk of altnet consolidation has been a common theme in the UK over the last few years, with Mesch even stating in the past that CityFibre was founded on the basis of consolidation.