Vodafone announced yesterday that it has completed the sale of half of its German fiber business to Altice.
The operator received approval from the European Commission in Germany a few weeks ago for what is effectively a fiber-to-the-home (FTTH) joint venture, so it was only a matter of time before the deal was completed.
However, there is an interesting point in Vodafone's largely perfunctory announcement.
The telco reminds us that the joint venture, still known as FibreCo, intends to invest up to 7 billion euros to roll out FTTH to 7 million homes over six years, a sum that will be financed partly through debt.
Vodafone revealed that "debt financing totalling up to €4.6 billion has been arranged with a group of leading financial institutions to support the network deployment."
A few weeks ago, we would have hardly noticed that these companies had arranged investors. That's par for the course. But in the wake of recent events in the German fiber market, it takes on greater significance.
In early January, Liberty Global-backed helloFiber pulled out of plans to roll out its fiber infrastructure in Germany and filed for Chapter 11 bankruptcy protection just four months after breaking ground. The problem was making the financial situation worse: macroeconomic factors played a role - including the rising cost of capital - as did the shortage of construction capacity. Essentially, from an investment standpoint, Liberty Global didn't think fiber was a good choice.
This runs counter to what we're used to seeing in fiber: that is, the investment community scrambling to get a piece of the action. This is not just an anomaly.
A month later, Glasfaser Direkt filed to start bankruptcy proceedings after its main investor, the John Laing Group, a subsidiary of KKR, also chose to halt its investment in German fiber. Glasfaser Direkt still continues to operate and seems determined to find new investors, but so far there is no news on this.
The Vodafone/Altice program is a very different beast due to its size and Vodafone's existing HFC footprint. Nonetheless, it is encouraging to see that the venture has secured the required investment.
Vodafone's announcement contained no further details on when construction is likely to begin, but we can expect to hear more from FibreCo in the coming months. It's unlikely that the telco will miss the opportunity to discuss its FTTH build-out.
