Vodafone Germany to invest extra EUR 2 billion in gigabit broadband

Monday 11 September 2017 | 08:59 CET | News

Vodafone Germany announced plans to invest an extra EUR 2 billion by the end of 2021 to roll out gigabit broadband services. The investment will include a combination of FTTP and upgrading its cable network. 

The biggest part of the additional capital expenditure, EUR 1.4-1.6 billion will go to connecting businesses. The target is fibre for 100,000 companies in around 2,000 business parks, deployed in co-operation with partners such as Deutsche Glasfaser and standalone. A minimum take-up of 40 percent will be required for the roll-outs to go ahead. 

Another EUR 0.2-0.4 billion will go to subsidised projects with local municipalities. These are expected to reach around 1 million rural consumer homes and take advantage of the growing amount of state subsidies available in Germany. 

The remaining EUR 0.2 billion will be spent on delivering gigabit speeds across Vodafone's 12.6 million cable homes. In July Vodafone launched the new top speed of 500 Mbps on its cable network, which already reaches over a fifth of the footprint. The company said it's decided to accelerate the roll-out of Docsis 3.1 from four years to two years under the new investment plan. This means the first big cities should get gigabit cable broadband in 2018. 

Vodafone said the investments respond to growing demand for faster speeds. In the first quarter of the current fiscal year, over half of its new broadband customers opted for speed of 200 or 400 Mbps, more than half the demand a year earlier. 

The plan also offers an attractive investment return, with the company saying it expects to earn a payback within four years at the business parks and within six years in the rural areas. Overall, the investment should add 1-2 percent to mid-term service revenue growth at Vodafone Germany from the second year of the plan (FY 2019-20) and above-average EBITDA margins. 

There should also be limited impact on cash flow, of EUR 100-200 million in the initial years. Vodafone Germany still expects capex in the mid-teens as a percentage of revenue, excluding the extra investment in gigabit networks. 

The increased investment comes amid growing calls in Germany for more investment in full fibre networks. Rival Deutsche Telekom has focused more on VDSL, but recently gave into pressure and launched its first gigabit broadband subscription over FTTH. 

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