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Alphabet is seeking outside investment for its GFiber internet business

Published 02/06/2024, 12:36 AM
Updated 02/06/2024, 12:40 AM
© Reuters. FILE PHOTO: Alphabet logo is seen near computer motherboard in this illustration taken January 8, 2024. REUTERS/Dado Ruvic/Illustration/File Photo

By Jeffrey Dastin

SAN FRANCISCO (Reuters) - Alphabet (NASDAQ:GOOGL) plans to seek external investment for GFiber, its business selling Wi-Fi and internet connectivity in parts of the United States, the company told Reuters on Monday, as it looks to ramp up its expansion to more cities.

GFiber, owned by Google's parent company, competes with larger internet service providers including Comcast (NASDAQ:CMCSA), Verizon Communications (NYSE:VZ) and AT&T (NYSE:T).

Since vowing 14 years ago that it would boost internet speeds 100-fold through fiber-optic cables, GFiber has expanded to 15 states starting with its 2012 launch in Kansas.

In the past six years, it has tripled its customer base, GFiber told Reuters, without specifying total users. It signed deals in 2023 that would bring its services to more than 25 additional cities.

Still, the company faces competition from big incumbents and has yet to provide internet in large swaths of the U.S., including six of the 10 most populous cities including 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 declined to comment on the amount of funds GFiber was looking to raise or the valuation it was seeking.

GFiber has already hired an investment bank to start the process of selling equity in the company, according to a source close to Alphabet's efforts. The future goal is for GFiber to be independent from Alphabet, the source said on condition of anonymity.

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

OTHER BETS

GFiber is one of Alphabet's so-called Other Bets, its collection of businesses other than Google that are at an earlier stage of research or commercialization. They include health company Verily and self-driving car business Waymo, which have both raised money from outside investors.

In 2023, the Other Bets collectively lost $4.1 billion on revenue of $1.5 billion, primarily generated by internet and healthcare-related services, according to Alphabet's annual report.

Porat, who also serves as chief financial officer, told analysts last week that Alphabet aimed to "sharpen our investment focus, while capturing the upside given compelling technology breakthroughs across the portfolio" of Other Bets.

© Reuters. FILE PHOTO: Alphabet logo is seen near computer motherboard in this illustration taken January 8, 2024. REUTERS/Dado Ruvic/Illustration/File Photo

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.

The company, like others in the technology sector, has recently announced job cuts. It declined to comment on whether GFiber's fundraising effort had any relation to Alphabet's overall cost-efficiency program.

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