Telefónica wins fibre deals with itself in Germany and Brazil

Telefónica has been mucking about with its fibre businesses in a bid to stay in the market in a more cost-effective way.

It’s is ready and raring to go when it comes to fibre rollout in Germany, so much so that this week it excitedly shared the news that the first customer on its Unsere Grüne Glasfaser (UGG) wholesale network will be…well, itself. That’s not exactly surprising information, but nonetheless, it seems Telefónica is hitting the ground running in the German fibre market.

It brokered a partnership deal with insurance company Allianz in late October, the pair committing to invest €5 billion over six years in a 50:50 joint venture to roll out fibre to 2.2 million households in rural and semi-rural areas of Germany. Unsere Grüne Glasfaser, or green fibre-optics, as the venture is known, is targetting communities with fewer than 10,000 inhabitants,

UGG will start rolling out fibre at the beginning of March, Telefónica revealed. Its first location will be the municipality of Maring-Noviand in the Rhineland-Palatinate. It explained that around 775 households, comprising 1,500 inhabitants in the Moselle wine growing region will benefit from fibre expansion.

Nearby Hermeskeil will be connected in the second wave, as will Baden-Württemberg towns of Malterdingen, Aach and Volkertshausen, the telco said. Customers will be offered its ‘O2 my Home’ tariff, Telefónica said, without specifying at what point it expects to be able to provide retail services on the network.

The partnership with Allianz in German is one Telefónica plans to replicate as it rolls out fibre in markets outside of Spain. At the telco’s results presentation last week chief operating officer Angel Vila Boix said it will follow a similar pattern in Brazil, where it is looking for partners for its FiBrasil venture.

FiBrasil is being carved out of Telefónica’s Vivo unit in Brazil and therefore already has a fibre-to-the-home (FTTH) network covering 1.6 million premises, but with one or more partnership deals in place it aims to pass 5.5 million premises in the next four years. It will roll out a wholesale FTTH network in selected mid-sized cities across Brazil outside the state of Sao Paulo.

Telefónica this week brokered a deal with Caisse de dépôt et placement du Québec (CDPQ) that will see the Canadian pension fund take a 50% stake in FiBrasil, with Telefónica holding the remainder, split between its Telefónica Brazil and Telefónica Infra units. CDPQ will invest up to R$1.8 billion (around $320 million) in the venture via both primary and secondary payments.

“Vivo will be FiBrasil’s anchor tenant, consolidating itself as the leading convergent operator in the country. The transaction is framed within our strategic pillars, allowing Vivo to improve time-to-market, while at the same time enabling a more efficient use of funds,” said Christian Gebara, CEO of Telefônica Brasil.

One of Telefónica’s major Brazilian rivals has embarked on a similar strategy.

TIM Brasil this week revealed that its FiberCo unit has attracted proposals from four parties interested in investing in it. FiberCo will be a wholesale fibre network operator, with TIM as its anchor customer, but the telco naturally aims to attract third-party tenants as well.

Adrian Calaza, TIM Brasil’s chief financial officer, naturally did not name the four would-be shareholders in FiberCo when he confirmed their existence at the company’s annual TIM Brasil Day on Monday. However, he said the telco expects to sign an agreement before the end of this quarter.

There’s a pattern emerging here. Telecoms operators are increasingly looking both to monetise the assets they have – and there are many ways of doing that – and to fund the expansion of those assets, namely their networks. Bringing investors in to their fibre operations is a way of accomplishing both, without losing control of those assets, which are perhaps not quite as non-core, or non-strategic, as their towers, for example. Investors want in to fibre and telcos need the money. Win-win.