Great Hill Partners

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4.10.2001
'Last Mile' Broadband Networker Raises $275 Million

NEW YORK-A group of private equity investors finalized $275 million financing package for CityNet Telecommunications Inc., the broadband infrastructure start-up said on Tuesday.

The deal was one of the largest private equity investments in a technology startup this year and marked yet another big bet by private investors in the hot optical fiber and broadband networking market.

Tuesday's investment in 2-year-old CityNet provides the Silver Spring, Md.-based, privately-held company with $175 million in cash and $100 million in debt financing for it to continue to deploy "last-mile" fiber optic networks to connect buildings in metro areas.

CityNet, which now has raised a total of $375 million, runs fiber optic lines through sewer systems in order to avoid costly and time-consuming trench digging along city streets, one of the physical impediments holding up broadband access for companies and consumers in cities.

Financing from Tuesday's round will be used by CityNet for engineering, constructing and materials in deploying fiber optic lines for the company's existing and anticipated markets, CityNet chief executive Bob Berger told WSJ.

CityNet began deploying fiber optic lines this year in Indianapolis, Ind., Omaha, Neb., and Albuquerque, N.M., and in March signed an agreement with an undisclosed municipal government of a major European city for a broadband network there.

A CityNet spokesman told WSJ the company is in late-stage talks for permits and licensing agreements with 28 other city governments in the United States and Europe, including Chicago, Washington, D.C., Dallas, and Dublin, Ireland.

CityNet's new investors in Tuesday's deal included private equity firms The Carlyle Group, Berkshire Partners, Trimaran Capital Partners, Great Hill Partners and Fay Richwhite.

They joined earlier investors including Telecom Partners, Crescendo Ventures and CIBC Capital Partners.