Vodafone Group PLC (LON:VOD) has said it is creating a joint venture with Altice to deploy fibre-to-the-home (FTTH) to up to 7 million homes in Germany over a six-year period.
The FTSE 100-listed firm said the partnership with Altice is complementary to its clear upgrade plans for its existing hybrid fibre cable network in the country. Vodafone operates a leading next-generation broadband network in Germany, currently offering up to 1Gbps connections to over 24 million homes.
In a statement, Nick Read, Vodafone chief executive, commented: "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.
"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."
Key elements of the joint venture and its investment plans include:
- To be owned 50% by Vodafone Germany and 50% by Altice
- To construct and operate a FTTH broadband network available to up to 7 million homes
- Approximately 80% of the FTTH roll-out will be focused around large housing associations in Vodafone's existing hybrid fibre cable network footprint which are interested in FTTH upgrades; and the remaining 20% of the roll-out will be outside of Vodafone's current footprint, focusing on neighbouring homes
- To offer wholesale access to all telecommunications service providers, to fully exploit the potential of the infrastructure
- To benefit from Vodafone's commercial expertise and relationships with housing associations and Altice's unique FTTH roll-out, wholesale and operational expertise
- Has contracted Geodesia - a subsidiary of Altice - for the majority of roll-out construction and maintenance
- The joint venture creation is expected to be completed in H1 2023
David Drahi, co-CEO of Altice, commented: "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 joint venture will offer wholesale access to all telecommunications service providers in Germany, exploiting the full potential of the fibre network. Vodafone Germany will act as the anchor tenant, entering into an agreement with the joint venture upon closing of the transaction.
Within the joint venture's footprint, Vodafone Germany has committed to market the network to new customers on an exclusive basis, whilst Vodafone Germany's existing network will continue to service customers who do not wish to migrate to FTTH. Vodafone Germany is not providing the joint venture with any minimum revenue or volume commitment, the company said.
As part of the transaction, Vodafone is expected to receive cash proceeds from Altice of up to €1.2 billion, comprising:
- An upfront payment of €120 million at closing;
- Additional deferred payments of up to €487 million (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), and
- An earn-out of up to €595 million (in aggregate) based on the joint venture's performance.
Over the roll-out period, the joint venture intends to invest up to around €7 billion, 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.
The transaction is subject to customary closing conditions, including regulatory approval and is expected to close in the first half of 2023.
Altice, a French multinational telecommunications and mass media company with official headquarters in the Netherlands, was founded and headed by billionaire businessman Patrick Drahi.
Last year, Drahi built an 18% stake in UK telecom giant BT Group (LON:BT) PLC - owner of rival UK mobile network EE - making him the company’s largest investor. In August, the UK government ruled that the BT stake did not pose any national security concerns.
In September this year, rival French telecoms billionaire Xavier Niel acquired a 2.5% stake in Vodafone, citing opportunities to accelerate a “streamlining” of the London-listed group’s business.
Niel, who founded the telecoms company Iliad, said he had taken the stake through his investment vehicle Atlas Investissement, which said it was “supportive of Vodafone’s publicly stated intention to pursue consolidation opportunities”.
In February, Vodafone revealed that it had rejected an €11.25bn (£9.8bn) offer for its Italian operation from Iliad.