With Germany trailing peers in the deployment of fibre, the Vodafone/Altice partnership could make a meaningful contribution to meeting the Government’s recent broadband strategy
Vodafone and Altice unveil German fibre partnership: Vodafone and Altice have announced plans to establish a 50-50 joint venture to deploy FTTH services to up to 7m homes in Germany over a six-year period. The ~€7bn partnership with Altice is complementary to Vodafone’s upgrade of its own hybrid fibre cable network, which currently spans over 24m residential premises in the country. Approximately 80% of the JV’s rollout programme will be focused around large housing associations in Vodafone’s existing network footprint that are interested in FTTH upgrades, while the remaining 20% will take place outside of this area, targeting neighbouring homes. Creation of the JV is expected to be completed in H1 2023, with Vodafone receiving cash proceeds from Altice of up to €1.2bn, including an upfront payment of €120m at closing.
Italy saw the first example of EECC-inspired co-investment: The Vodafone/Altice agreement in Germany is not the first case of co-investment by telcos to be announced following implementation of the European Electronic Communications Code (EECC). In Italy, TIM’s co-investment plan saw the first application of the EECC’s new rules, which – after certain modifications – received approval from AGCOM. Under Article 76 of the code, operators designated with significant market power (SMP) can be exempt from access obligations on co-invested networks if they fulfil specific criteria, e.g. openness, transparency and sustainable long-term competition. Though Altice has agreed fibre JVs in France and Portugal, ‘regulatory hold-up’ and broadband state aid guidelines have been considered major barriers to co-investment. It remains to be seen whether the forthcoming Connectivity Infrastructure Act will provide the necessary incentives for further partnerships.
Germany trails peers on fibre rollout and take-up: According to BNetzA, 8.9m premises had FTTH/B access at the end of 2021, an increase of 2.2m on the previous year. Though coverage growth is expected to accelerate during 2022, Germany is nevertheless languishing in the deployment (and adoption) of full fibre, due in part to Deutsche Telekom’s pursuit of vectoring technology and the presence of cable broadband operators. In theory, the Vodafone/Altice JV will make a meaningful contribution to the reach of Very High Capacity Networks (VHCNs), helping to deliver against both the German Government’s ‘Gigabitstrategie' and the EU’s Digital Decade targets. Notably, the JV will offer wholesale access to all telcos in the country, with Vodafone acting as the anchor tenant. In the absence of any minimum revenue or volume commitment, Vodafone/Altice will likely be looking to secure Deutsche Telekom as a customer, which could influence the pace of rollout and the ultimate performance of the partnership.
