For investors hoping to cash in on fiber assets, conditions in Europe are looking up. Although a number of markets are still mired in economic difficulties, competition in the telecoms sector remains vibrant, with the region's major operators increasingly desperate to control both mobile and fixed networks. As Vodafone's recent buying spree indicates, a mobile-only strategy is no longer seen as enough. (See ONO Says Yes to Vodafone and Vodafone Sets High Speeds, 4K for Germany .)
Vodafone, clearly, epitomizes the transformation now under way, as operators that once specialized in providing either mobile or fixed services look to develop an all-round capability. Having last year raised $130 billion from selling out of US mobile giant Verizon Wireless, the UK-based operator has this year nabbed superfast broadband businesses in Germany and Spain. (See Vodafone Agrees to $130B Verizon Stake Sale.)
And earlier this month, it was reported to be eyeing a takeover of Italian broadband operator Fastweb, which plans to cover 7.5 million Italian homes with fiber-to-the-curb and fiber-to-the-home (FTTH) networks by the end of 2016.
But Vodafone is just one of several big hitters currently on the acquisition trail. Deutsche Telekom has repeatedly emphasized its need to be an "integrated" services provider with mobile and fixed infrastructure in each of its European markets. Perturbed by its fixed-line shortcomings in parts of Eastern Europe, the German incumbent coughed up €546 million (US$690 million) for GTS Central Europe, which owns fiber-optic networks in the region, in November last year. (See Deutsche Telekom to Buy GTS CE.)
Orange has also been in the mood for M&A. Responding to Vodafone's €7.2 billion ($11.6 billion) move for Spanish cable operator ONO in March, the French company offered €3.4 billion ($5.46 billion) for FTTH player Jazztel last month. Following a deal, Spain would have three big players able to provide both mobile and fixed broadband services. (See Fiber Sizzles in Spain as Orange Targets Jazztel.)
Several factors appear to be driving all this takeover activity. First, operators fear being left behind in the quad-play market, where consumers buy fixed voice, broadband, TV and mobile services in one package. Deutsche Telekom has blamed its recent troubles in Poland -- where it lost nearly half a million mobile customers last year -- on its inability to respond to quad-play competition from Orange. In Germany, it introduced a new quad-play offer last month, and in the UK its EE joint venture with Orange took a huge step in the quad-play direction with the launch of a TV service earlier in October. (See Risky Business for EE.)
Operators are also keen to cut their dependency on former state-owned fixed-line monopolies. During the rollout of copper-based broadband technology, local loop unbundling gave alternative operators control of last-mile connections. But these players have become mere resellers of the incumbent's service in the fiber era, complaining that wholesale conditions make it impossible for them to compete. Vodafone Germany knew its wholesale deal to use Deutsche Telekom's vectoring-enabled broadband network would prove insufficient when it swooped for Kabel Deutschland just a few weeks later. (See TalkTalk's Small Fiber Beginnings.)
Mobile backhaul demands could also spur interest in fiber acquisitions. Microwave technologies and old copper lines are ill suited to the needs of the modern 4G operator, while mobile businesses are as aggrieved as fixed at the wholesale rates incumbents charge for optical fiber rental. Deutsche Telekom's mobile subsidiaries might be able to use infrastructure owned by GTS as a backhaul alternative to renting capacity from incumbents. (See Brighter Outlook For Dark Fiber in 4G Era and Poll: Optical Fiber Best for Backhaul.)
Is further consolidation imminent? Outside Italy, Telefonica has risen to the top of Germany's mobile market following its acquisition of E-Plus, but it looks vulnerable on the quad-play front, relying on a wholesale agreement with Deutsche Telekom to provide broadband services. In August, it was seen as a possible suitor for cable operator Versatel -- which German ISP United Internet eventually snapped up -- but Telefonica could be on the lookout for other opportunities. (See Eurobites: Telefónica Gets EC Green Light on E-Plus Deal.)
In Poland, meanwhile, Orange continues to punish Deutsche Telekom's mobile subsidiary. Closer ties with GTS might address its shortcomings in the enterprise sector, but they seem unlikely to help much in the more important consumer market, where GTS looks weak. In August last year, Deutsche Telekom was reported to have shown interest in buying Netia -- which serves about 11% of Poland’s broadband market, according to research firm Point Topic -- but it was soon distracted by its move for GTS. If quad-play pressure continues to mount, might Netia once again figure in the operator’s plans?
— Iain Morris, Site Editor, Ultra-Broadband