By Costas Pitas and Paul Sandle
LONDON, Nov 9 (Reuters) - Vodafone VOD.L will partner with fibre network developer CityFibre CITYC.L to bring ultrafast broadband to 5 million UK homes and businesses by 2025, in a direct challenge to dominant rival BT BT.L .
Vodafone and other British telecom companies buy capacity on BT's BT.L Openreach network but have long complained that the former monopoly privileges its own services to their disadvantage.
BT has been trying to persuade Vodafone and other wholesale Openreach customers to help shoulder the burden of new investment in its own network.
But on Thursday Vodafone struck out on its own, saying the deal with CityFibre would give it access to a superior product at a lower cost and under better conditions than Openreach's regulated wholesale terms.
"The UK has fallen far behind the rest of the world, trapped by the limited choice available on legacy networks. We look forward to working with CityFibre to build the Gigabit fibre network that the UK needs and deserves," Vodafone UK Chief Executive Nick Jeffery said.
BT is under huge pressure from the government to accelerate the pace of its fibre network roll-out.
Vodafone's deal with CityFibre makes it more likely that BT will have to stump up more of the cost itself. Jeffery told reporters on Thursday he had not ruled out investment with other partners.
The former monopoly's earnings are already being dragged down by problems at its unit that provides consulting and network services to businesses and faces higher costs for pensions and sports rights.
Vodafone had said in September it was looking at laying its own ultrafast full-fibre broadband connections if it could find partners to share the costs.
CityFibre will own and operate the new network and Vodafone will have exclusive rights to use it for an unspecified period. Construction of the first phase for 1 million premises will be largely completed by 2021, the companies said in a statement.
"The Vodafone and CityFibre partnership represents one of the most significant developments in UK telecommunications since the launch of ADSL broadband around 17 years ago," they said.
Openreach said it welcomed Vodafone's announcement as investment in more fibre-to-the-premises (FTTP) technology across the UK "will need commitment from the whole industry".
A spokesman for BT Openreach said its own plan to upgrade 2 million premises was "well under way" and the company aims to reach 10 million homes and businesses with FTTP by the mid-2020s.
(Editing by Tom Pfeiffer and Jason Neely)