Alphabet (GOOGL.O) has disclosed its intention to seek external investment for GFiber, its subsidiary specializing in Wi-Fi and internet connectivity services across parts of the United States, signifying the company’s ambition to accelerate its expansion into additional cities.
GFiber, a subsidiary of Google’s parent company, competes with major internet service providers such as Comcast (CMCSA.O), Verizon Communications (VZ.N), and AT&T (T.N).
Since its inception 14 years ago, with a commitment to enhancing internet speeds through fiber-optic cables, GFiber has gradually expanded its operations to cover 15 states, commencing with its launch in Kansas in 2012.
Despite witnessing a threefold increase in its customer base over the past six years and securing deals in 2023 to extend its services to over 25 additional cities, GFiber faces stiff competition from established incumbents and is yet to provide coverage in significant areas of the U.S., including six out of the ten most populous cities like New York.
Ruth Porat, Alphabet’s President and Chief Investment Officer, expressed optimism about GFiber’s future prospects, stating that raising external capital would enable the company to enhance its technical capabilities, broaden its reach, and deliver improved internet access to more communities.
While Alphabet refrained from disclosing the specific amount of funds GFiber intends to raise or the valuation it seeks, reports suggest that the company has enlisted the services of an investment bank to initiate the equity sale process. Moreover, there are aspirations for GFiber to eventually operate independently from Alphabet, according to a source familiar with the matter.
GFiber falls under Alphabet’s portfolio of “Other Bets,” encompassing businesses beyond Google at various stages of research or commercialization. These ventures include health company Verily and self-driving car business Waymo, both of which have attracted investments from external parties.
In 2023, the collective “Other Bets” incurred a loss of $4.1 billion on revenue of $1.5 billion, predominantly derived from internet and healthcare-related services, as per Alphabet’s annual report. Porat indicated that Alphabet aims to focus its investments strategically to leverage technological breakthroughs across its portfolio of “Other Bets.”
Porat also revealed that Alphabet’s moonshot division, known as X, is exploring opportunities to secure external capital for further project development. Additionally, Alphabet is undertaking cost-efficiency measures, including job cuts, a trend observed across the technology sector. However, the company did not confirm whether GFiber’s fundraising initiative is linked to its broader cost-saving initiatives.