The new FibreCo aims to deploy fibre-to-the-home (FTTH) to up to seven million homes over the next six years
Today, Vodafone and Altice have announced a new 50:50 joint venture (JV) for the German fibre market.
The newly formed FibreCo will invest up to €7 billion in deploying FTTH over the next six years, aiming to pass seven million homes with gigabit-capable fibre.
Around 80% of this rollout will cover large housing associations already within Vodafone’s hybrid fibre cable network footprint that are looking to upgrade to FTTH. The remaining 20% will focus on neighbouring homes outside of Vodafone’s current footprint.
The fibre company will offer wholesale access to its network to the rest of the German market, with Vodafone serving as its anchor tenant.
“This partnership builds on Vodafone’s significant next generation network with Altice’s industrial expertise and proven FTTH construction capabilities enabling us to bring gigabit connectivity to even more customers in Germany,” explained Nick Read, CEO of Vodafone Group. “We are proud of our long-standing relationships with housing associations and pleased as a trusted provider to bring more connectivity options for tenants. This significant infrastructure investment supports the country’s social, economic and digital development and the broadband ambitions of the German government as part of Europe’s Digital Decade targets.”
In forming the JV, Altice will pay Vodafone up to €1.2 billion; €120 million will be paid upfront at the deal’s closure, while €487 million will be paid incrementally as the rollout progresses past 1.4 million homes and up to €595 million will be paid as an earn-out (i.e., depending on the JV’s performance).
As always, the formation of this JV is subject to regulatory approval, with the deal expected to close in H1 2023, assuming swift approval.
The formation of this new fibre player will be a major shakeup for the German market, which has seen a surge of fibre investment in recent years, with incumbent Deutsche Telekom leading the charge.
At the end of 2021, Deutsche Telkom had passed just over 3 million homes with FTTh, with a goal of reaching 10 million homes by 2024. Smaller rival Deutsche Glasfaser has similarly ambitious targets, having passed roughly 1.2 million homes at the same milestone, aiming for 4 million passed by 2024.
The new FibreCo will clearly have some catching up to do, but its ambitious rollout plans should put it within striking distance of Deutsche Telekom’s market hegemony.
In addition, Vodafone says that the JV’s FTTH rollout will take place alongside existing network upgrades, including introducing ‘node splitting’ and DOCSIS 3.1 ‘high split’, which will give German customers access to speeds of over 3Gbps.
Vodafone as a Group has been under increasing pressure in recent years, with lacklustre financial results seeing Read and other executives call for consolidation in a number of key markets.
While some such consolidation has already begun, such as with TPG in Australia in 2020, other deals have failed to materialise. In Spain, for example, the company has long been rumoured as seeking a merger with MasMovil, but the latter ultimately struck a tie-up with Orange instead earlier this year. Reports in recent weeks have suggested that Vodafone may now be considering selling a stake in its fixed network in Spain as a means to reduce investor pressure on the troubled business unit.
However, an even bigger shift could soon be on the horizon for Vodafone, when the company announced earlier this month that it was engaged in ongoing talks to merger its UK unit with CK Hutchison’s Three UK.
In the meantime, however, Vodafone’s vulnerability has not gone unnoticed. Back in May, newly rebranded United Arab Emirates (UAE)-based telco group, e&, purchased a 9.8% stake in Vodafone for $4.4 billion as a way of enhancing its international portfolio.
More recently, back in September, French telecoms billionaire Xavier Niel acquired a 2.5% stake in Vodafone, citing ‘streamlining’ opportunities for the UK-based telco group.
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