Vodafone and Altice confirm investment for German fibre ops

Vodafone on Wednesday announced that it has completed the sale of half of its German fibre venture to Altice.

That in itself is not hugely newsworthy. The operators secured the approval of the European Commission for what is in effect a fibre-to-the-home (FTTH) joint venture in Germany a couple of weeks ago, so closing the deal was only a matter of time.

However, there is an interesting point in what is a largely perfunctory announcement from Vodafone.

The telco reminded us that the JV, still known as FibreCo, intends to invest up to €7 billion in the rollout of FTTH to 7 million homes over a six-year period, and that the sum will be partly financed by debt.

“Total debt facilities of up to €4.6 billion have been arranged with a group of leading financial institutions to support the network deployment,” Vodafone revealed.

A few weeks ago we would barely have registered that the firms have investors lined up. It would have been a given. But in the wake of recent events in the German fibre market it takes on much greater significance.

In early January Liberty Global-backed helloFiber pulled back from its plan to roll out fibre infrastructure in Germany and filed for bankruptcy protection just four months after breaking ground. The problem was making the financials stack up: macro-economic factors played a part – including the rising cost of capital – as did a shortage of construction capacity. Essentially, Liberty Global decided that fibre was not a good bet, from an investment point of view.

That ran counter to what we had become used to seeing in fibre: the investment community champing at the bit to get a piece of the action, that is. And it was not merely an anomaly.

A month later Glasfaser Direkt filed an application to open insolvency proceedings after its major investor, KKR-owned John Laing group, also chose to stop investment in German fibre. Glasfaser Direkt is continuing operations and seems determined to find a new investor, but there has been no news on that front to date.

The Vodafone/Altice plan is a very different beast, due to scale and to Vodafone’s existing HFC footprint. But nonetheless it is encouraging to see that the venture has secured the investment it needs.

There are no further details in Vodafone’s announcement around when the build is likely to get underway, but we can expect to hear more from FibreCo in the coming months. The telcos are unlikely to miss the opportunity to talk about their FTTH build out.

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