To meet EU connectivity targets and rising demand for faster broadband, operators are increasingly turning to co-investment to supercharge fibre rollouts
Vodafone and Altice see Germany JV waved through: The EC has approved under the EU Merger Regulation the creation of a 50-50 joint venture between Vodafone and Altice in Germany. The JV, known as FibreCo, will deploy and operate fibre infrastructure for up to seven million homes over a six-year period (predominantly in the same geographic area – i.e. mainly urban – as Vodafone’s current cable network). Though Vodafone will act as FibreCo’s anchor tenant, the project will also offer wholesale access to all telcos on an open and non-discriminatory basis. In its decision, the EC concluded that the proposed concentration would not raise competition concerns given the limited horizontal overlaps and vertical links between the companies' activities in the relevant markets.
Germany’s Government has made digital infrastructure a national priority: Following the launch of its ‘Gigabitstrategie' in July 2022, digital infrastructure has been made a national priority. The strategy is targeting 100% full fibre access by 2030, with an interim milestone of 50% of premises covered by 2025. However, Germany is currently trailing many European peers in the deployment (and adoption) of full fibre, due in part to Deutsche Telekom’s reliance on vectoring technology to upgrade its copper network. Though the incumbent has accelerated FTTH deployments more recently, the bulk of Germany’s initial rollout of fibre was led by altnets, such as Deutsche Glasfaser, and there remains a significant urban-rural divide in gigabit coverage. While one of the largest FTTH initiatives in Europe, only 20% of FibreCo’s €7bn planned (largely debt-based) investment will be outside of Vodafone’s current footprint, even then focusing on neighbouring homes.
Regulation could make co-investment more attractive to telcos: The EC’s decision on the Vodafone/Altice deal was followed by it clearing the creation of Alpen Glasfaser, a JV between Magenta Telekom and asset manager Meridiam in Austria. Together, the firms will invest €1bn to connect 650,000 premises to fibre by 2030, while also offering wholesale bitstream access to other telcos. Over the past decade, co-investment has been utilised in Europe’s leading fibre markets, such as Portugal and Spain, to improve the economics of new infrastructure deployments. Under the European Electronic Communications Code (EECC), operators 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. With this approach reflected in the EC’s draft Gigabit Recommendation, co-investment could finally become a more attractive option for operators, especially in the face of the 2030 Digital Decade targets and increasing demand for higher speed broadband.
