Telefónica, Allianz Create Joint Venture to Deploy FTTH in Germany

Telefónica and Allianz have reached an agreement for the creation of a joint venture to deploy Fibre-to-the-Home (FTTH) in Germany.

Following closing, Telefónica Group and Allianz Group will each hold 50% in the joint venture company under a co-control governance model. Telefónica Group’s participation will be held through Telefónica Infra (its infrastructure unit) holding 40% and Telefónica Deutschland / O2 holding a 10% stake. Allianz Capital Partners will invest 50% in the joint venture on behalf of Allianz insurance companies (“Allianz”) and the Allianz European Infrastructure Fund.

Operating as a neutral wholesale company, the joint venture is set to deploy local fibre optic networks in underserved rural and semi-rural areas across Germany and to offer FTTH wholesale access to all telecommunications service providers so they can in turn offer these services to their end customers.

Allianz, one of the world´s leading insurers and investors, and Telefónica as one of the largest telecommunications service providers globally provide strong pillars supporting the company’s ambitious plans. Allianz contributes its experience from several fibre investments, longstanding investment strength and expertise as well as strong local presence. This investment follows Allianz’s commitment to significant fibre roll-outs in France and Austria.

Telefónica brings its technical capabilities and expertise in deploying and operating fibre networks. Telefónica Spain will provide network design and operations expertise throughout the deployment years. In addition, the company will benefit from Telefónica Deutschland / O2 distribution power over its various on- and offline channels as its first wholesale client and provider of certain transport infrastructure.

As an independent FTTH open platform, the company is uniquely positioned to unlock the enormous potential of Europe’s largest broadband market whilst at the same time contributing to Germany’s social, economic and digital development.

The newly formed company aims to deploy more than 2 million Homes Passed in rural and semi-rural areas creating a fibre network of over 50,000 kms delivering environmental benefits through energy efficient operations and enabling the transition to fibre in the deployment areas.

The joint venture intends to invest up to EUR 5 billion through different sources of funding: shareholders’ equity, a long term subordinated loan plus non-recourse external financing. Investments are spread out during the 6 year deployment period, Telefónica will invest up to EUR 0.5bn equity and Allianz will invest up to EUR 1.0bn through different instruments.

This business opportunity allows Telefonica to crystallize the value of its know-how whilst safeguarding the Group’s financial priorities in the interests of all stakeholders, through a ring-fenced and non-consolidated structure.

Ángel Vilá, Chief Operating Officer at Telefónica Group, commented “We are very enthusiastic about the opportunity to partner with Allianz, one of the world’s largest investors with whom we share the ambition to drive fibre roll out in Germany, contributing to accelerate the country’s digital development. We are delighted to put our expertise behind this partnership, joining forces with Allianz as a key element for success, strengthening Telefónica Infra's value proposition and reinforcing the strategy presented by Telefónica a year ago.”

Guenther Thallinger, Member of the Board of Management of Allianz SE: Investment Management and ESG, commented, “Allianz as a committed investor in essential infrastructure is excited to enter into a joint venture with an experienced partner in the Fibre-to-the-Home segment like Telefónica. Ongoing digitalisation of our society and increasing data volumes more and more require high bandwidth for households as is currently evidenced by the COVID crisis with millions of people having shifted to working and learning from home. We are proud to invest in a sustainable infrastructure which we believe will also ensure attractive returns for our policyholders.”

Markus Haas, CEO Telefónica Deutschland / O2, commented “German customers want fast and stable internet connections. We see huge potential for the fibre-optic market in Germany, as currently less than ten percent of all households are connected to fibre. Access to the new open FTTH platform would allow us to offer our o2 private and business customers highly powerful fibre-optic connections in even more and so far underdeveloped regions. This complements our strategy to provide a strong fixed-line service offering to our customers for an excellent price-performance ratio. Our stake in the new wholesale company provides us with an attractive long-term investment in a market with enormous future potential”

The transaction is subject to the approval of the competent merger control authorities and closing is expected to occur in the first half of 2021.