The European Commission has approved plans for Vodafone and Altice to spend billions of euros to roll out a joint fiber-to-the-home infrastructure in Germany.
The new business will need to meet certain merger rules because it is a joint venture, but it took only a few weeks to approve it after the companies submitted their application. However, it came at an interesting moment for the German fiber market.
Last October, when Vodafone and Altice announced their plans to create FibreCo, a 50:50 joint venture with a commitment to spend up to €7 billion to launch FTTH, the German market looked very hot. But since then, times have changed.
Late last year, we were still very excited about the influx of fiber manufacturers in Germany, including the highly regarded helloFiber brand backed by Liberty Global Ventures and InfraVia Capital Partners. HelloFiber broke ground in August, but its network rollout was short-lived; last month, its parent company Liberty Networks Germany revealed that it would not be going any further due to macroeconomic factors - the cost of capital is significant - and a shortage of construction capacity. and a shortage of construction capacity, it would not invest further in the market. Essentially, it can't make financial sense.
And it's not the only one. A few short weeks later, Glasfaser Direkt filed to start bankruptcy proceedings after its main investor, John Laing Group, a KKR affiliate, also chose to stop investing in German fibers. Glasfaser Direkt is still continuing to operate and it is making all the right noises about finding new investors, but there are questions about its ability to do so.
All of this means that the Vodafone and Altice joint venture will be operating in a different climate than the one they may have envisioned when they finalized the details of their partnership last summer.
However, while FibreCo's multibillion-euro investment may not meet its parent company's expectations, the company does have an advantage over many other fiber manufacturers.
Vodafone has a strong existing footprint in the German broadband market, and the FTTH rollout is essentially an upgrade to its wireline network, an infrastructure it acquired when it bought Liberty Global's Unitymedia in 2018. The joint venture plans to cover 7 million homes, representing 80% This is part of Vodafone's current HFC footprint, with the remaining 20% covering adjacent premises.
This is not the same as a true greenfield FTTH deployment. So while the joint venture will face many of the same challenges as other fiber manufacturers, it is not as tough from an investor's perspective. The scale involved should also help increase the numbers.
