Deutsche Telekom plans new fiber JV in Germany: report
Deutsche Telekom (DT) plans to set up a new fiber joint venture (JV) in Germany with a yet to be determined private equity partner, aiming to cover up to 4 million rural areas across the country in the years to coming, the German newspaper Handelsblatt reported.
Sources told the outlet that DT is looking to inject € 6 billion (roughly $ 7 billion) into the effort by 2028. However, that would start with an initial investment of € 1 billion, DT and his partner each contributing half of this amount. The operator’s board is expected to reflect on the matter at a meeting next week.
Summarizing why DT would make such a decision, Jefferies analysts noted that “the benefit is an acceleration in fiber deployment which reduces the opportunity to choose altnets without affecting FCF. [free cash flow]. Notably, DTE’s joint venture needs to focus on rural areas where such selection is currently occurring, but where DTE would likely not focus its own initial deployment.
Earlier this year, DT set a goal of serving 10 million fiber-to-the-home (FTTH) homes by 2024. Its interest in using a joint venture as a vehicle to push that number further is perhaps not surprising given that the German market is expected. experience significant growth in the years to come. A recent report from the FTTH Council Europe predicted that the number of FTTH crossings in Germany would increase from 9 million in 2021 to 33 million in 2026, with subscriptions expected to increase from 3.5 million to 25.5 million during the same. period.
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Rival Liberty Global is also looking to capitalize on this opportunity, launching a joint venture with InfraVia Capital Partners last month to roll out FTTH in underserved municipalities. Telefónica announced a similar move in October 2020, teaming up with Allianz to launch a joint venture targeting fiber delivery to 2 million homes in Germany.
DT itself is no stranger to joint ventures and already has one in Germany. In 2020, he launched a fiber joint venture called Glasfaser Nordwest with utility company EWE focused on providing FTTH to 1.5 million homes and businesses in the northwest region of the country. Additionally, in April this year, the operator’s investment arm, Deutsche Telekom Capital Partners, partnered with private equity group KKR to launch Open Dutch Fiber, targeting FTTH deployments in the Netherlands. .
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Interestingly, it appears that Glasfaser Nordwest recently ran into a problem when the German Higher Regional Court in Düsseldorf revoked the approval of the joint venture after receiving complaints from Vodafone expressing concern that the company was hampering competition.
In a translated press release, Glasfaser Nordwest said the court’s decision was “a decision and not a judgment – and no longer legally binding.” He added that he was continuing to expand fiber despite the ruling as DT and EWE assessed their legal options. If the decision is upheld, Glasfaser Nordwest said regulators would have a few months to reassess the joint venture and may apply tighter competitive conditions to it.