The two companies are joining forces to create a new company - FibreCo - that will deploy FTTH to up to 7 million homes within six years.
Vodafone operates a network in Germany that currently provides up to 1Gb/s of connectivity to more than 24 million homes. The partnership is designed to complement the company's plans to upgrade its existing hybrid cable network. This includes bringing fiber optic connections closer to all connected homes through "node splitting" and DOCSIS 3.1 "high splitting" to achieve download speeds in excess of 3Gb/s. The goal is that these plans, combined with technological advances such as DOCSIS 4.0, will provide a path to 10Gb/s speeds over time.
FibreCo will be owned 50% by Vodafone Germany and 50% by Altice. It will build and operate an FTTH broadband network for up to 7 million homes, of which approximately 80 percent will be focused on large housing associations in Vodafone's existing network footprint that are interested in FTTH upgrades. The remaining 20% will be outside of Vodafone's current footprint and will be focused on neighbouring houses.
FibreCo will provide wholesale access to all telecom service providers to exploit the full potential of the infrastructure. Vodafone Germany will be the anchor tenant and will enter into an agreement with FibreCo upon completion of the transaction. FibreCo has contracted Geodesia (a subsidiary of Altice) for the majority of the rollout construction and maintenance.
As part of the deal, Vodafone expects to receive cash proceeds of up to €1.2 billion from Altice, including an upfront payment of €120 million and additional deferred payments of up to €487 million (in total) as a rolling payment - rollout progresses (once the first 1.5 million homes are passed until the end of the rollout). Based on FibreCo's performance, it will also earn up to €595 million (in total).
During the launch period, FibreCo intends to invest up to approximately €7 billion, 70% of which is expected to be financed by non-recourse debt to Vodafone and Altice. Vodafone's share of the equity contribution is expected to be lower than the cash proceeds realized over time.
Nick Reid, Group CEO of Vodafone, said: "This partnership builds on Vodafone's significant next generation network and Altice's industry expertise and proven FTTH build-out capabilities, enabling us to deliver gigabit connectivity to more customers in Germany. We are proud of our long-standing relationship with housing associations and are excited to bring more connectivity options to tenants as a trusted provider. This major infrastructure investment supports Germany's social, economic and digital development and the German government's broadband ambitions as part of the European Digital Decade goals."
David Drahi, Co-CEO of Altice, added: "We are pleased and honored to partner with Vodafone to build and operate an FTTH network connecting up to 7 million premises in Germany. Altice's existing presence in Germany through Geodesia, its unique track record of operating over 45 million homes in Europe and the US using the latest ultra-high speed fibre network, and Vodafone's competitive position as a major tenant, will help us build one of the largest FTTH ventures in Europe. We have pioneered fibre joint ventures in France and Portugal, so are delighted to be able to replicate such a feat in Germany with such a partner."
The transaction is expected to close in the first half of 2023.
