Alphabet is exploring external investment opportunities for its GFiber internet business.

Alphabet Inc
Alphabet Inc

Alphabet (GOOGL.O) is exploring external investment opportunities for GFiber, its venture offering Wi-Fi and internet connectivity in certain U.S. regions. The move, disclosed to Reuters on Monday, aims to accelerate expansion into additional cities.

GFiber, a subsidiary of Google’s parent company, faces competition from major internet service providers like Comcast (CMCSA.O), Verizon Communications (VZ.N), and AT&T (T.N).

Since vowing 14 years ago to enhance internet speeds by 100 times using fiber-optic cables, GFiber has grown its presence to cover 15 states since its inception in Kansas in 2012.

Over the last six years, GFiber has tripled its customer base, although the exact figure remains unspecified. In 2023, the company secured deals to extend its services to over 25 additional cities.

Despite this growth, GFiber encounters stiff competition from established players and has not yet penetrated significant parts of the U.S., including six of the top 10 most populous cities, such as New York.

“This next step of raising external capital will enable them (GFiber) to scale their technical leadership, expand their reach, and provide better internet access to more communities,” Ruth Porat, Alphabet’s president and chief investment officer, told Reuters in a statement.

Alphabet refrained from disclosing details regarding the funds GFiber aims to raise or the desired valuation.

A reliable source close to Alphabet’s initiatives mentioned that GFiber has engaged an investment bank to initiate the equity selling process. The ultimate objective is for GFiber to operate independently from Alphabet, as per the source who requested anonymity.

GFiber CEO Dinni Jain said in a statement: “We are now ready to scale this much faster.”

Other Bets

GFiber belongs to Alphabet’s category of “Other Bets,” encompassing businesses beyond Google that are in earlier stages of research or commercialization. This category includes entities like Verily, a health company, and Waymo, a self-driving car business, both of which have garnered external investment.

According to Alphabet’s annual report, in 2023, the “Other Bets” segment incurred a collective loss of $4.1 billion despite generating $1.5 billion in revenue, primarily derived from internet and healthcare-related services.

Porat, who holds the position of chief financial officer as well, informed analysts last week that Alphabet’s objective is to “sharpen our investment focus, while capturing the upside given compelling technology breakthroughs across the portfolio” of Other Bets.

One such business, Alphabet’s moonshot division known as X, was also looking for external capital to spin out more projects, she said at the time. Alphabet generally is working to revamp its cost base, Porat said.

Similar to other firms in the technology sector, the company has recently revealed workforce reductions. It refrained from providing comments on whether GFiber’s fundraising initiative is connected to Alphabet’s broader cost-efficiency initiatives.

Source: Reuters

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