The companies are jointly creating a new company – FibreCo – to deploy FTTH to up to 7 million homes over a six-year period.
Vodafone operates a network in Germany, currently offering up to 1Gb/s connections to more than 24 million homes. This partnership is designed to complement the firm’s upgrade plans for its existing hybrid fibre cable network. This includes bringing fibre connections closer to all connected homes through ‘node splitting’ and DOCSIS 3.1 ‘high split’, which enables download speeds of over 3Gb/s. The aim is that these plans, coupled with technology advances, such as DOCSIS 4.0, will provide a path to 10Gb/s speeds over time.
In terms of plans for the new joint venture, FibreCo will be owned 50% by Vodafone Germany and 50% by Altice. It will construct and operate a FTTH broadband network that will be available to up to seven million homes, of which around 80% will be focused around 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, focusing on neighbouring homes.
FibreCo will offer wholesale access to all telecoms service providers in order to fully exploit the potential of the infrastructure. Vodafone Germany will act as the anchor tenant, entering into an agreement with the FibreCo upon closing of the transaction. FibreCo has contracted Geodesia (a subsidiary of Altice) for the majority of roll-out construction and maintenance.
As part of the transaction, Vodafone is expected to receive cash proceeds from Altice of up to €1.2bn, comprising an upfront payment of €120m at closing and additional deferred payments of up to €487m (in aggregate) to be paid 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 €595m (in aggregate) based on FibreCo’s performance.
Over the roll-out period, FibreCo intends to invest up to c.€7bn, of which 70% is expected to be financed by debt that will be non-recourse to Vodafone and Altice. Vodafone’s share of equity contributions is expected to be lower than the cash proceeds realised over time.
Nick Read, Vodafone Group Chief Executive, comments: “This partnership builds on Vodafone’s significant next generation network with Altice’s industrial expertise and proven FTTH construction capabilities, enabling us to bring gigabit connectivity to even more customers in Germany. We are proud of our long-standing relationships with housing associations and pleased as a trusted provider to bring more connectivity options for tenants. This significant infrastructure investment supports the country’s social, economic and digital development and the broadband ambitions of the German government as part of Europe’s Digital Decade targets.”
David Drahi, co-CEO of Altice, adds: “We are delighted and honoured to join forces with Vodafone to build and operate a FTTH network connecting up to 7 million premises in Germany. Altice’s existing presence in Germany through Geodesia, its unique track record in operating over 45 million homes with the latest very-high speed fibre networks across Europe and the US, together with Vodafone’s competitive position as anchor tenant will help us establish one of the largest FTTH ventures in Europe. We have pioneered fibre joint ventures in France and Portugal, and are thus thrilled 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.
