Vodafone Portugal to Boost FTTH Footprint With NOS Deal

Vodafone has said its Portuguese business will build and share fiber networks with cable operator NOS, giving it access to another 1.3 million homes and businesses and piling further pressure onto Portuguese telco incumbent Portugal Telecom.

The operators are to build a fiber-to-the-home (FTTH) network covering about 2.6 million premises, taking advantage of their existing infrastructure while also extending services into "greenfield" communities that lack broadband networks.

Vodafone Portugal said the deal would boost its network coverage from around 2.7 million homes to around 4 million, which equals about 80% of the households in Portugal.

Under the deal announced today, each operator will take responsibility for FTTH rollout in certain areas. The companies will then provide reciprocal access to each other's networks on commercially agreed terms.

Vodafone and NOS did not indicate in their statement how much the latest FTTH plan would cost.

However, both operators expect to begin marketing services on the new FTTH networks in early 2018 and have said their retail offers will be entirely independent of the other's.

The deal ties in with Vodafone's European strategy of relying on partnership agreements to extend the coverage of fiber networks and will mean the operator is able to reach about 100 million European homes with high-speed broadband services, up from around 98 million previously.

In Portugal, it has previously teamed up with Portugal Telecom SGPS SA (NYSE: PT) subsidiary MEO and says it can now reach about 500,000 homes through a reciprocal access agreement with MEO. It also has a wholesale agreement with MEO that gives it access to about 200,000 homes.

Vodafone Portugal currently serves about 4.7 million mobile customers and some 550,000 fixed broadband subscribers.

The rollout of gigabit broadband access networks is spreading. Find out what's happening where in our dedicated Gigabit Cities content channel here on Light Reading.

News of today's deal comes several weeks after Vodafone's German business said it would spend about €2 billion ($2.4 billion) on building gigabit-speed broadband networks for business and residential customers. (See Vodafone to Pump €2B Into German Gigabit Networks.)

As in Portugal, Vodafone Germany has teamed up with a local player (Deutsche Glasfaser) with which it will collaborate on providing gigabit-speed services to around 100,000 German businesses across 2,000 business parks.

Keen to reduce its dependency on the Openreach access business of market leader BT Group plc (NYSE: BT; London: BTA), Vodafone UK has also expressed interest in building fiber-to-the-premises (FTTP) networks if it can find the right partners. "We want to build FTTP but I can't make the economics work and if entrepreneurs can find better ways to improve the economics and avoid the Openreach stranglehold I am all ears," said Vodafone CEO Nick Jeffrey during a press briefing in London last month. (See Vodafone UK Boss Slams Openreach 'Stranglehold'.)

Interest in fiber deployment has partly been fueled by the growth in data traffic on advanced mobile networks, which increasingly require high-speed "backhaul" connections between basestations and operators' core network systems.

Vodafone has previously complained that the regulatory framework in markets such as the UK and Germany prevents it from gaining access to the incumbents' network facilities, which could theoretically be used for backhaul purposes. (See Europe's Backhaul Black Hole Looms Above 5G.)

Colt Technology Services Group Ltd , a network operator that serves enterprise customers, has voiced similar objections and said that conditions are far more favourable in southern European markets including Portugal. In these countries, companies such as Vodafone can now use the "passive" network infrastructure owned by incumbents to build their own fiber networks, says Barney Lane, Colt's director of UK regulatory affairs.

Vodafone's fiber foray already appears to have put some pressure on the business of Portugal Telecom, which saw earnings (before interest, taxation, depreciation and amortization) shrink 8.3% in the recent April-to-June quarter, to about €255 million ($299 million), compared with the year-earlier quarter, even though it reported stable revenues of €576 million ($676 million) over the same period.

Vodafone said service revenues in Portugal rose by 5.5% year-on-year in the April-to-June quarter, partly due to "continued strong fixed customer growth."

— Iain Morris, News Editor, Light Reading

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