Liberty Global plays down German fibre U-turn

Liberty Global-backed helloFiber has changed its mind about rolling out fibre infrastructure in Germany and filed for bankruptcy protection instead.

The firm, which broke ground just over four months ago, appears to have been unable to make the financials stack up, which must be a worrying sign for the plethora of fibre builders springing up across Europe.

We have frequently highlighted the risk of overbuild in some of the continents busiest markets – Germany and the UK, for example, where rollout is happening at a frenetic rate, albeit later than in many other countries – and the likelihood of consolidation. But now it seems that having to throw in the towel is also a real possibility for the myriad companies sticking fibre in the ground.

Liberty Networks Germany, which runs helloFiber, confirmed the market withdrawal in a statement on Monday, effectively playing down the decision.

“Over the last 12 months, Liberty Networks Germany has embarked on a project to assess the opportunities that may exist around building fibre-to-the-home greenfield networks by targeting a small number of under-served municipalities in the country. Having carefully reviewed the results, the partners in the JV have decided against proceeding with the next phase of the project,” it said.

However, Broadband TV News, which broke the story late last week based on a chat with helloFiber CEO Christian Böing, has a little more to add.

Böing, who described the move as “the last possibility to press the stop button,” the company having only made preliminary investments in the market, noted that helloFiber has filed for insolvency and has appointed an administrator. He explained that a change in macroeconomic conditions – rising inflation and interest rates, and a lack of access to external capital – hit the company’s rollout plan. He also highlighted rising rollout costs, a shortage of construction capacity, and the challenge of attracting the right communities to the project.

That give us a much better understanding of the situation, and serves as a warning to other budding fibre builders in Germany and elsewhere – the returns are promising, but the bumps in the road to achieving them are growing.

Liberty Global clearly had its eyes on the former when it announced its 50:50 joint venture with InfraVia Capital Partners to create Liberty Networks Germany in September 2021.

“Liberty Networks Germany offers an exciting opportunity to leverage our expertise in deploying critical broadband infrastructure in a market we know very well,” said Robert Dunn, Managing Director, Connectivity Investments at Liberty Global, at the time. “We’re also excited by the attractive returns offered by greenfield fibre network deployment in a country where millions of homes don’t yet have access to fast and reliable broadband.”

In all fairness, the company did say it would take a ‘controlled approach’ to the market opportunity, and you could argue that that is exactly what it has done. But we didn’t expect it to end up like this, and doubtless the firm itself didn’t either.

The decision to pull helloFiber out of the German market raises a couple of interesting questions that we will be looking for answers to over the coming months. Firstly, will we see more of the same in Germany, with other fibre builders bowing out? While Liberty Global and InfraVia clearly have their own boundaries on financial investments and returns that might not necessarily match those set out by other companies, the challenges outlined by Böing are hardly unique to them; the whole market, and those further afield, are facing the same headwinds.

Secondly, it’s worth keeping an eye on Liberty Global’s dealings in the UK. The firm and its UK partner Telefonica together have a 50 percent stake in a UK FTTH joint venture, with InfraVia holding the other 50 percent. This venture is different, in that the companies aim to roll out FTTH to 5 million homes not served by the Virgin Media O2 network in the next few years, and have signed up the telco as a retail customer. But nonetheless, it will be interesting to see how that pans out.

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