Vodafone has partnered with the French telco Altice to launch FibreCo, a joint venture which will deploy a fibre broadband network to up to seven million homes in Germany, its biggest market.
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The new company intends to invest up to €7 billion (£6 billion), 70% of which is expected to be financed by debt, and will be owned 50% by Vodafone Germany and 50% by Altice. It aims to construct and operate a “fibre-to-the-home” (FTTH) broadband network over a six year period.
The British telco currently offers up to 1 gigabit per second (Gbps) connections to over 24 million homes in Germany. It hopes the partnership with Altice will complement its upgrade plans for its existing hybrid fibre cable network where it's aiming to provide 10 Gbps speeds in the future.
Around 80% of the roll out will focus on large housing associations in Vodafone’s existing hybrid fibre cable network footprint and the remaining 20% will be outside of the British telco’s current footprint, focusing on neighbouring homes.
FibreCo is set to offer wholesale access to all telecommunications service providers to fully exploit the potential of the infrastructure. The joint venture will benefit from Vodafone’s commercial expertise, and relationships with housing associations, and Altice’s FTTH roll-out, wholesale, and operational expertise.
“This partnership builds on Vodafone’s significant next generation network with Altice’s industrial expertise and proven Fibre-to-the-Home construction capabilities enabling us to bring gigabit connectivity to even more customers in Germany,” said Nick Read, the chief executive of the Vodafone Group. “We are proud of our long-standing relationships with housing associations and pleased as a trusted provider to bring more connectivity options for tenants.”
Additionally, FibreCo has contracted engineering and construction company Geodesia, an Altice subsidiary, for the majority roll out and construction and maintenance. The creation of the joint venture is expected to be completed in the first half of 2023 and is subject to customary closing conditions including regulatory approval.
Vodafone is expected to receive cash proceeds from Altice of up to €1.2 billion as part of the transaction. This includes an upfront payment of €120 million at closing, additional deferred payments of up to €487 million as the roll out progresses once the first 1.5 million homes have been passed and until the end of the roll out. It will also receive an earn-out of up to €595 million based on FibreCo’s performance.
The British telco is investing in its biggest market after it suffered a drop in service revenue in Germany earlier this year. The group said in July 2022 it had lost 79,000 TV and 64,000 broadband customers in the first quarter, a 0.5% decline in service revenue in the country after a law came into effect ending automatic renewals and one of its IT systems underperformed, according to Reuters.
The company said that customer losses weren’t as bad as the previous quarter after it managed to fix its IT problems, and churn related to the new law started to decrease.
"We're on track to resolve the issues in Germany by the end of the summer as planned, which will further support a gradual recovery in our commercial performance," Read said at the time.
