Vodafone to Inject 2B Euros in Broadband Business

On Monday, the UK-Based telecommunication company, Vodafone Group PLC, revealed plans of its Germany division, Vodafone’s biggest European market, to invest 2 billion euros, or $2.38 billion, over the next four years to roll out ultra-fast fibre broadband services, which are expected to provide 13.7 million new gigabit connections targeting primarily German customers and enterprises, according to the company.

Gigabit Investment Plan

Vodafone said the additional spending on its network would improve the German unit’s service revenue growth by one to two percentage points, compared with previous estimations, and to improve its profitability.

The company said the connections would consist three areas of focus, namely, Giga-Business, which targets 100,000 companies in around 2,000 business parks; Giga-Municipality, which would partner with local municipalities to reach around a million consumer homes; and Giga-Cable, which would upgrade existing cable infrastructure to Vodafone’s 12.6 million cabled homes.

It has apportioned the biggest part of the investment to Giga-Business area of the project, which builds on an existing relationship with fibre-to-the-premises, or FTTP, network provider Deustche Glasfaser; two months ago, both agreed to work together to cover 19 business parks by early next year.

The telco company said Giga-Business would involve an incremental investment of between 1.4 billion euros and 1.6 billion euros, while Giga-Municipality would cost 0.2 billion to 0.4 billion euro, and Giga-Cable carried a figure of 0.2 billion euro.

However, Vodafone said it needs a 40% take-up rate among businesses in an individual park before it can proceed with the spending.

The cable part of the plan will see Vodafone spend around 200 million euros to accelerate the speed of its cable broadband network to 1 Gbps from 500 Mbps at present by increasing the rollout of DOCSIS 3.1 over two years, compared with its previous four-year plan.

 “I am excited to announce this transformation investment plan for Germany, which will bring Gigabit broadband services to millions of consumers and businesses,’ said Vodafone Germany CEO Hannes Ametsreiter.

“The project is consistent with our strategic goal to become a leading converged communications operator in Germany, enabled by a best-in-class Gigabit network infrastructure.”

The company said it would apply a “success-based model” which would meet the company’s “disciplined investment criteria,” with a pleasing estimated rate of return of over 20% and a typical payback period of under four years per business park and under six years per municipality.

“I am confident that these largely success-based will deliver incremental revenue growth and attractive returns for Vodafone’s shareholders,” Hannes added.

It also said it would take an “efficient co-investment approach” with partners, to lessen the annual slog on group cash flow to between 100 million euros and 200 million euros in the first years of the plan.

Gigabit is the term being used in the broadband industry to describe high-speed connections capable of transferring around one thousand bits of data per second, more than ten times faster than BT’s Infinity 2 fibre broadband in the UK.

Meanwhile, Vodafone Group PLC traded 0.73%, or 1.56, to 214.95 GBX, by 2:10 PM GMT+1. It opened at $215.25 GBX, with a session high of 216.80, and a session low of 213.85 GBX. Its market capitalization was 60.45 billion.

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