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Telefónica nears $5.9B FTTH deal in Germany – report

Telefónica Infra – a new infrastructure division set up by Telefónica in the organizational rejig – is in the "final stages" of wrapping up a deal worth some €5 billion (US$5.9 billion) to build an FTTH network, according to a Reuters report.

Details are a bit sketchy but, according to people familiar with the matter, Telefónica Infra is on the verge of signing a deal with banks and an "infrastructure investor." Banks will apparently lend two-thirds of the money needed, with the remainder being stumped up in return for equity.

The Reuters report seemed to indicate that investors will get a stake in Telefónica Infra, but the creation of a separate German investment vehicle – that sits within Telefónica Infra – is more likely.

Telefónica Infra's remit is an "open approach to agreements and shareholder structures [majority or minority], and to find the best partners for each type of asset," and it applies to all markets in which Telefónica has a presence, not just Germany.

Telefónica Deutschland is likely to take a passive equity stake in the investment vehicle, say unnamed sources, and become an "anchor customer."

What the FTTH?

Some are questioning the wisdom of building out more FTTH infrastructure in Germany's highly competitive market and adding to Telefónica's already substantial debt pile in the process.

"Maybe I lack the imagination, but I struggle to see a good starting point for Telefónica to build a FTTH network in Germany," said one industry source cited by Reuters.

In July, Ángel Vilá, Telefónica's chief operating officer, trailered the new FTTH network, emphasizing it will roll out to parts of the country overlooked by Deutsche Telekom, Vodafone and regional cable companies.

Perhaps to ease the financial burden of the new FTTH build, Telefónica Infra recently transferred about 10,100 mobile sites from Telefónica Deutschland to Telxius for a transaction fee of about €1.5 billion ($1.8 billion).

Telxius, in which Telefónica has a 50.01% stake, falls under the wing of Telefónica Infra. Other shareholders in Telxius include KKR and Pontegadea, two investment firms with respective stakes of 40% and 9.99%.

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— Ken Wieland, contributing editor, Light Reading

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