Deutsche Telekom announced an agreement with IFM Global Infrastructure Fund (GIF), part of Australia’s pension fund-backed IFM Investors, to form a 50%/50% joint venture known as GlasfaserPlus, which will roll-out fiber-to-the-home (FTTH) broadband to rural areas of Germany. Specifically, IFM GIF will acquire a 50% stake in Deutsche Telekom’s company GlasfaserPlus GmbH for €900m ($1.0bn), valuing the total joint venture at €1.8bn ($2.1bn).

Initially, IFM GIF will pay 50% of the total purchase price, equivalent to €450m, upon its entry into the joint venture. Subsequently, the remaining 50% or €450m will be paid as the joint venture expands and progresses.

GlasfaserPlus – Deutsche Telekom, IFM

GlasfaserPlus is headquartered in the Cologne area of Germany and will roll-out fiber-optic networks starting in 2022. Over a period of 6 years, from 2022 to 2028, the joint venture expects to build fiber-to-the-home (FTTH) passings to 4+ million homes in rural Germany. Across these homes, GlasfaserPlus will deliver fiber broadband services with speeds of up to 1 gigabit per second.

In terms of pacing, GlasfaserPlus plans to build 100k+ FTTH passings in 2022. Further, the joint venture anticipates increasing its pacing to almost 500k passings during 2023. Therefore, this implies that GlasfaserPlus will need to reach a pacing of ~850k passings per year between 2024 through 2028, in order to reach its 4+ million homes target.

Open Access Wholesale Fiber Network

GlasfaserPlus will operate its fiber network under an open access wholesale model. Indeed, this means that the fiber network will be open to Deutsche Telekom as well as its competitors. Additionally, Deutsche Telekom will sign a wholesale agreement with GlasfaserPlus upon closing of the transaction.

Financing

Bank financing will support a ‘significant part’ of GlasfaserPlus’ fiber deployment plan. In terms of equity, Deutsche Telekom will utilize the initial €450m purchase price payment from IFM GIF to fund a substantial portion of its equity commitment to the joint venture. Finally, GlasfaserPlus will also participate in government subsidy tenders to secure incremental financing.

Governance

Deutsche Telekom and IFM Global Infrastructure Fund (GIF) will jointly exercise control over the GlasfaserPlus joint venture in Germany.

Deutsche Telekom – Fiber-to-the-Home (FTTH) Plans in Germany

Beyond the GlasfaserPlus joint venture, Deutsche Telekom intends to expand its fiber optic network in Germany to reach 3.5 million passings by year-end 2021 (pacing of 1.2 million passings in 2021). Furthermore, Deutsche Telekom is targeting 10 million passings in Germany by 2024. From 2024 onwards, the company intends to make an average of 2.5 million FTTH passings per year in Germany.

Deutsche Telekom Fiber-to-the-Home (FTTH) Roll-Out in Germany

Deutsche Telekom Fiber-to-the-Home FTTH Roll-Out in Germany

Rural Germany

Deutsche Telekom previously planned to supply a total of 8 million households in rural Germany with fiber optics by 2028. Importantly, the GlasfaserPlus joint venture will result in 4 million additional household passings in rural areas. In turn, this will raise Deutsche Telekom’s target to 12 million household passings in rural Germany by 2028.

Germany’s Fiber-to-the-Home (FTTH) Expansion

Following Germany’s target for 100% gigabit infrastructure by 2025, a number of institutional investors have made commitments to Germany’s fiber-to-the-home (FTTH) market. Specifically, these include UBS Asset Management (Lünecom), Basalt Infrastructure (goetel), InfraVia Capital (Liberty Global JV), and iCON Infrastructure (SFN).

Jonathan Kim covers Fiber for Dgtl Infra, including Zayo Group, Cogent Communications (NASDAQ: CCOI), Uniti Group (NASDAQ: UNIT), Lumen Technologies (NYSE: LUMN), Frontier Communications (NASDAQ: FYBR), Consolidated Communications (NASDAQ: CNSL), and many more. Within Fiber, Jonathan focuses on the sub-sectors of wholesale / dark fiber, enterprise fiber, fiber-to-the-home (FTTH), fiber-to-the-premises (FTTP), and subsea cables.

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