CityFibre will build and run a network, with Vodafone having a period of exclusive rights to market services.
The UK’s broadband infrastructure is dominated by BT’s Openreach business and Virgin Media, with other telecom companies buying capacity on BT’s network.
Vodafone UK chief Nick Jeffery said: “The UK has fallen far behind the rest of the world, trapped by the limited choice available on legacy networks.”
CityFibre’s Greg Mesch said the agreement would “unlock the UK’s full fibre future.”
Ofcom and politicians have both put pressure on Openreach to increase its investment in full-fibre networks.
Jonathan Oxley, Ofcom’s competition director, said in a statement yesterday: “This shows there is real momentum behind full-fibre broadband.
“We’re making it quicker and easier to lay these networks, which will help support the UK’s future economy.
“We want to see commitment to full-fibre investment right across the industry.”
CityFibre’s shares rose 17½p to 60¾p, while Vodafone rose 6p to 221¾p.