Open access fiber

New investment opportunities opening up for gigabit

broadband in Europe

July 2020
Content

Executive summary 3

1. High activity in open access fiber deals in Europe in 2018-19 4

2. Investing in open access fiber is an ecosystem game changer 6

3. Success factors observed in open access fiber business models 11

4. Strategies pursued by telcos in reaction to increased interest in open access fiber 12

Conclusion 14

Authors:

Dr. Karim Taga Glen Peres

Partner Manager
TIME*, Vienna TIME, Vienna
taga.karim@adlittle.com peres.glen@adlittle.com

*TIME: Telecommunications, Information, Media and Electronics

Executive summary

Fiber and open access fiber deal activity has been high in 2019, accounting for 45 percent of
total telecom sector deal value, suggesting a high interest from investors, including from
traditionally non-telco investors like infrastructure funds, energy companies and so forth.
Investing in open access fiber is an ecosystem game changer, not just because it delivers
macroeconomic benefits to the country but because it brings in higher valuations to
shareholders (compared to traditional integrated telecom entities), delivers better
operational efficiency KPIs to telecom operators and provides better customer experience
to end users.

We have observed some common themes in successful open access fiber business
models. First, they involve multi-party investment from several entities outside the telecom
ecosystem, such as energy companies, municipalities, real estate companies and
infrastructure investors. These entities bring in not only fresh capital but also expertise to roll
out and operate long-term infrastructure, like fiber. Second, commercialization success is
catalyzed by open access wholesale models because almost all retail telcos have access to
the same underlying wholesale fiber infrastructure, accelerating take-up and improving
overall operational economics.

As open access fiber gains acceptance, traditional telecom operators are adjusting their
fixed broadband strategies accordingly. Traditionally, incumbents resisted partnering with
open access fiber entities and fought against doing so by accelerating their own fiber (fiber
to the home [FTTH] or fiber to the curb [FTTC]) rollout. Recently, however, we have seen
some incumbents trying to partner (through wholesale and whole-buy agreements) or
acquire open access fiber entities. In addition, cable companies are trying to avoid getting
squeezed out by incumbents on one side and open access fiber challengers on the other
side by making incremental upgrades to their cable networks or by tactically reselling
wholesale fiber when possible. Meanwhile, challenger telcos are proactively forging
partnerships with open access fiber entities and are aggressively trying to expand their fixed
broadband offerings to gain market share in what was traditionally the incumbents’ turf.
Non-telcos, especially energy and utility companies, are seeing new business opportunities
in open access fiber in selected markets to both invest as well as operate fiber
infrastructure.

We believe open access fiber will continue to expand, especially in markets that do not yet
have nationwide fiber access. If the deal volume in 2020 is similar to the deal volume in
2019, we can expect enough funding for 24 million new homes to be passed with fiber this
year.

3
1. High activity in open access fiber deals
in Europe in 2018-19

Europe saw approximately 60€ billion worth of telecom sector The most prominent of all these deals comes from Open Fiber,
deals in 2019, of which fiber and open access fiber transactions which announced nationwide fiber coverage for Italy, with a
together contributed a share of 45 percent (see Figure 1). More business plan to pass 18 million homes over the next six years
than half the fiber deals executed last year were open access (see Figure 2). Subsequently, the company has successfully
fiber, with a total value of 13.2€ billion, the largest of them obtained 3€ billion in government funding for rural fiber and
coming from Deutsche Glasfaser DE, inexio DE, Covage FR, another 3.5€ billion of debt funding for the rest of the country.
Altice PT, CityFibre UK, in addition to the Open Fiber IT deal in In the first quarter of 2020, Bloomberg reported that Open
2018. All top five EU countries have witnessed at least one high- Fiber might become a target of a high-profile acquisition by the
profile open access fiber transaction in the last two years. incumbent Telecomm Italia (TIM), along with PE fund KKR, to
create a nationwide open access fixed infrastructure provider
Open access fiber together with fiber is clearly taking the in Italy. It is noteworthy that Italy, which until recently was one
lead in almost all telco deals, with fresh external investment of the lagging fiber markets, is now seeing multi-billion-dollar
coming from private equity (PE) funds/infrastructure funds (e.g., interest – not just from Open Fiber but also from TIM. These
Deutsche Glasfaser, inexio) and energy companies (Open Fiber), deals are expected to propel Italy as one of the leading fiber
in addition to government funding for rural fiber and traditional markets in Europe in the next five years.
telecom investment in fiber. (We provide a detailed perspective
into the origins of FTTH wholesaling, giving rise to a case for a
new fiber model, in our upcoming Arthur D. Little report, “A new
future to come: M&A delivering ideas on FTTH wholesaling. ”)

Figure 1: Telco deal volume and deal value in Europe in 2019

Cumulative volume of telco deals in 2019 Cumulative value of telco deals in 2019
2019, in # 2019, in € billion

Open access fiber: 16% of deals Open access fiber: 21% of deal volume
16 Open access fiber + fiber: 40% of deals 14.8 Open access fiber + fiber: 45% of deal volume
15
13.2

10.9
11 10.4

6.2
6 5.5
4 4

2
0.6 0.5

Fiber Data Open Towers Cable Incumbent Mobile Satellite Fiber Open Towers Data Satellite Incumbent Cable Mobile
centers access access centers
fiber fiber

Source: Arthur D. Little, publicly available deal information

4
Figure 2: Open Fiber Italy case study

Open Fiber history

2015 2016 2017 2018 2019 2023

 Open Fiber (OF) founded  OF acquires MetroWeb in  OF aims to roll out fiber to  5Mil HP with FTTH within  The incumbent TIM is now  OF would be the largest
by Enel 12/2016, which passes 9.5Mil HS in Region A/B 2.5 years reacting with a bid to fiber operator in Italy
 Enel is the Italian national 1.1Mil HS with fiber in covering almost all merge its telco assets with
 43% HP growth in 2018  OF would be the largest
utility distributor Milan, Bologna and Turin competitive regions in Italy that of , thus creating a wholesale-only fiber
and approx. 100k HS  OF wins concessions from  Secured 3.5€ Bil debt nationwide InfraCo operator in the world
connected
Infratel worth 3.0€ Bil to financing for the
 CDP equity takes 50% roll out fiber to ~9.3Mil HS nationwide rollout
ownership in OF in Regions C/D
 CDP equity is part of the  OF will roll out and
Italian Sovereign wealth operate the C/D network,
fund to improve the while Infratel retains
competitiveness of Italy ownership and provides
financing

HS: Households HP: Households passed with fiber telco: telecommunication OF: Open Fiber Italy
Source: Arthur D. Little, publicly available deal information

5
2. Investing in open access fiber is an
ecosystem game changer

Investing in open access fiber is not a business-as-usual digitalization in the market, the benefit of fiber outside the
strategy, but rather an ecosystem game changer for the whole telecom sector is further amplified.
country. The impact on the macroeconomic fundamentals of the
n The COVID-19 crisis has further emphasized that access to
market is significant, with the economy, investors, operators and
high-speed broadband is necessary for a successful digital
end users standing to benefit in the following ways:
ecosystem. A detailed analysis of the impact of COVID-19
n Macroeconomic benefit to the country. on the telecom sector, as well as the economy in general, is
covered in a special report1 published by Arthur D. Little.
n Higher valuations/returns to shareholders.
n Open access fiber encourages new investments from
n Better efficiency and commercialization success to
traditionally non-telecom players in the telecom sector.
operators.
Entities such as PE funds, infrastructure funds, debt lenders
n Gigabit speeds at affordable prices. and so on, are taking an active interest to invest in open
access fiber ventures. Typically, up to 80 percent funding can
Macroeconomic benefit to the country be obtained from such third-party non-telco entities, bringing
in fresh capital to the telecom industry and providing much
n Open access fiber pushes fiber coverage across the whole
needed funding relief to the telecom sector. Consider the
country above 80 percent. Especially in markets where ultra-
case of Open Fiber, which obtained more than 3€ billion of
high-speed broadband penetration has been stagnating for
funding from the government and another 3.5€ billion from
many years below 20 percent (e.g., in Italy and Germany),
a consortium of multiple banks, while the equity investment
the impact of open access fiber is significant. Given that
is estimated to have been less than 1€ billion. This is an
fiber is necessary for future 5G rollout and to accelerate

Figure 3: Successful open access fiber transaction

Inexio (plans for 2Mil+ HHs fiber) was

Siro a JV (2015) between the Irish
acquired for 1€ Bil by EQT
electricity utility and Vodafone
Deutsche Glasfaser (1Mil+ HHs
announced rollout plans for 0.5Mil 70% fiber, plans for 10Mil+ HHs) was
HHs expected to go up to 1m HHs. 20%
acquired 2.5€ Bil.
It has a high 45% take up with 1%
10% Both are rumoured to have fiber
majority users having Gbps speeds. 10% swap agreements with DT (2020).
2%
CityFibre in UK, with ambition to roll Swisscom is rolling fiber to 80% of the
out plans to 8Mil HHs. It was 70% country, in CAPEX partnership with
acquired for 0.8$ Bil by Goldman 60% 70+ municipalities (2015-20).
Sachs in 2018, and subsequently Even with open access, Swisscom
20% 8%
obtained 2.5 + 1.1 Bil GBP of funding is estimated to have gained 10%pp
for its fiber. CityFibre acquired 80% retail market share.
FibreNation in Jan 2020.
10% Open Fiber Italy is taking the lead to
Telefonica Spain rolled out fiber to roll out fiber to 80% of the country
95% of the country and has (2017). It is owned by Enel and
mutual wholesale deals with successfully obtained 3.5€ Bil of debt
Vodafone, Orange and others 98% and another 3€ Bil of govt funding.
(2010-2020).
99%
10% Covage France is rolling out fiber to
Portugal Telekom rolled out fiber to 10% 3m rural HHs, with 50% funding from
95% of the country and offers a Swiss PE fund, and was recently
wholesale access to other telcos. acquired by Altice for 1€ Bil (2019).
Altice bought Portugal Telekom for It has as customers Orange, Boygues
7.4€ Bil in 2018. and 200+ retail clients.

Source: FttH Council, Arthur D. Little, publicly available information

1 https://www.adlittle.com/en/insights/prism/leading-businesses-through-the-covid-19-crisis

6
 effective example of fresh capital injection into the telecom n Open access fiber entities have shown substantial value
sector. In Figure 3, we highlight successful fiber transactions creation in terms of enterprise value (EV) increase in the last
in the recent years that either raised capital through five years (as seen in Figure 4), sometimes as high as a 10x
infrastructure funds or forged successful wholesale/whole- value increase, compared to EV erosion in four of the largest
buy agreements with other telco entities. European telcos (as seen in Figure 5).
n Open access fiber entities have shown consistent increases
Higher valuations/returns to shareholders in transaction value per home passed in the last five years,
n Open access fiber companies have demonstrated higher from an average of 5x in 2015 to 5-10x in 2018-19.
valuations versus traditional telco players – sometimes
recent transactions have been estimated as high as 10-25x
EBITDA versus 5-8x for traditional telcos. A reason for the
high valuations could be that open access fiber is a long-
term, low-OPEX, stable asset backed up with multiple long-
term wholesale contracts, which in theory is more similar to
infrastructure businesses (e.g., energy, transportation) than
telecom. Such potentially high valuations are encouraging
shareholders of some incumbent telcos to consider carving
out and spinning off their infrastructure into an independent
entity to invest in fiber or merging with an existing fiber
entity.

Figure 4: EV/EBITDA for fibercos

Evolution of EV/EBITDA multiple for fibercos (2011-2020)

30x
Covage
Deutsche Glasfaser
25x

inexio
20x Jazztel Altice
Ufinet Spain
IP-Only
EV/EBITDA

Metroweb
SFR FTTH
15x euNetworks
Eurofiber GlobalConnect Zayo
Interoute
10x Tampnet
COLT
GTS CEE
5x
Cable & Wireless Worldwide

0x
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Transaction year
Source: MarketScreener, Arthur D. Little, other public sources

7
Figure 5: EV of telcos vs. fibercos

Telco players – EV Open access fiber players – EV

2014–2018/19, € Bil 2014/2015–2018/2019/2020, € Bil

+13%
+87%

-68% -28%
161 2,80
142 144 145
+2 230%

105 -11% 1,79

+296% 1,50
82
73 +482%
+1 558%
0,99
46
0,67 0,73

0,25
0,04 0,08 0,13

1 2

2014/2015 2018/2019/2020
1) IP-Only was initially acquired in 2013
2) Deutsche Glasfaser was acquired in early 2020
Source: Ycharts, MarketScreener, Reuters, Expert opinion, Arthur D. Little

n In Figure 6, we plot the estimated EV based on publicly potential acquirers are willing to pay a premium for the future
available information about the number of homes passed coverage that the fiberco hopes to achieve.
with fiber during the time of the deal. Note that most fiber
entities have a large amount of debt; hence the actual equity
value of the transaction and the cash that the acquirer
pays the target is usually lower by a factor of 3-5x than the
EV indicated in the figure. Moreover, many of these deals 5

happened during the early life of the fiberco, indicating that

Figure 6: Fiber transaction value per home passed

Estimated EV per homes+SMEs passed

Selected transactions, 2015-2020, in ‘000 €

Acquirer
Target
EUR 0.73 Bn EUR 1.79 Bn EUR 0.3 Bn
EUR 0.99 Bn Transaction Value
EUR 0.67 Bn

11.5
EUR 0.45 Bn
EUR 0,99 Bn

EUR 2.00 Bn

8.6 EUR 2.80 Bn EUR 0.24 Bn

EUR 1.50 Bn EUR 0.49 Bn

7.5 EUR 0.58 Bn

EUR 3.60 Bn
6.7
6.4
EUR 0.09 Bn EUR 0.25 Bn
5.1 5.0
EUR 1.00 Bn
4.4
3.6 3.7
3.3
EUR 1.99 Bn 2.5 EUR 0.20 Bn EUR 0.03 Bn
2.3
EUR 4.36 Bn

1.4 1.5
1.2 1.3
0.5 0.6
0.2

2015 2016 2017 2018 2019 2020

Source: City, Merril Lynch, Morgan Stanley, MarketScreener, Arthur D. Little SME: Small and Medium Enterprise EV: Enterprise Value

8
Figure 7: Operational efficiency KPIs of fiber vs. legacy infrastructure networks

Network operating KPIs benchmark

Fiber vs. xDSL technology, different operators

Network fault rate Network maintenance OPEX Energy costs

2.5x lower 4x lower 15x lower 2.1x lower 7.1x lower 2.2x lower 2.5x lower 3.0x lower 6.7x lower

100% 100% 100% 100% 100% 100% 100% 100% 100%

48% 45%
40% 40%
33%
25%
14% 15%
7%

National National Regional Regional Regional National National National National

operator operator operator operator operator operator operator operator operator

Fiber networks have reduced complexity compared to legacy networks leading to lower operational KPIs resulting in OPEX reduction

KPIs on xDSL KPIs on fiber

Source: Arthur D. Little, analysis based on publicly available information

Better efficiency and commercialization success to with open access fiber have gained up to 5pp (percentage
operators points) of market share, even though they provide open
access fiber to competitors (as illustrated in Figure 8). For
n Open access fiber is operationally more efficient compared
example, Swisscom in Switzerland is reported to have
to incumbent legacy networks, sometimes by a factor of
increased its market share by 6pp even though it has
2-7x, as optical networks are inherently easier to operate
supplied all its competitors with open access fiber in the last 7
than traditional copper-based networks (as shown in Figure
five years. When fiber is available in the market to all players,
7). This results in much lower operational costs, along with
the focus of competition shifts from providing merely higher
better margins compared to legacy fixed networks.
broadband speeds to providing higher-quality customer
n Fiber operators achieve market share gains from non-fiber experience and new services.
operators, and even from existing cable operators. Telcos

Figure 8: Market share gains of fiber vs. non-fiber entities

Development of market shares through fiber investment

WE incumbent
Fixed BB market shares Fixed BB market shares DSL and fiber BB market share Fiber and overall BB MS
2013-2016, in k subs 2005-2015, in mn subs 2017, in % 2019, in %
3,740 3,950 39
35

1,459 1,390
(35%) 22
(39%)
85%
∆ 16 pp
∆ 9 pp

1,811 1,995 18 21 54% 55%

(54%) 42%
(48%) (51%) 8 (53%)
(36%)
2013 2016 2005 2010 2015 Market share in Market share in Market share in Market share
Swisscom Sunrise NTT Cable DSL footprint FttH footprint fixed BB market in fiber market
UPC Others KDD/other FttX Others

With its strong market share in

Swisscom has defended and NTT has achieved a +18pp market Latvian Tet leads the fiber market,
the FTTH footprint, the incumbent
gained market share and could share gain in line with rolling out which allows it to maintain a
manages to stay the largest
thereby also increase the delta to fiber to appx. 95% of Japan leading position in the overall
operator in the overall fixed BB
the cable challenger UPC by 7pp following an open access model broadband market
market

Source: Arthur D. Little, BuddeComm, European Commission, ACM

9
Figure 9: Advertised basic broadband home packages of telcos in Italy

Comparison of gigabit speed packages vs. prices in selected markets – June 2020

Price Eur/month Exclusive fiber

Gbps is a premium package at Wholesale fiber available
1 000 Gbps is the basic package at affordable rates of
prices of 300-600+ €/m
30€/m Open access fiber market
Etisalat AE

Ooredoo QA

Du AE
Gbps is the basic package at affordable
rates of 25€/m, Multi-Gbps also available
Vodafone QA
100
Vodafone ES
Yoigo ES
Orange ES Vodafone PT
Fastweb IT
NOS PT Wind 3 IT Singtel SG MyRepublic SG
Movistar ES
MEO PT TIM IT
Vodafone IT Tiscali IT Starhub SG M1 SG

10
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Source: Arthur D. Little, Operator websites

Note: Size of bubble indicates speeds. Some operators like Du AE, Vodafone QA, Movistar ES, Orange ES, Vodafone PT do not offer or do not provide details of 1000 Mbps offers on their
websites

n Fiber operators typically have 5-10pp lower churn compared n Fiber-based broadband provides better customer experience
to non-fiber players. This is the highest-impacting business to the end user. The value proposition is not just high
driver for telcos pushing fiber broadband versus legacy, and speeds, but also the increased quality of services the
even versus cable broadband. customer perceives while using broadband. It gives the
telCo an opportunity to up-sell new partner content, such as
9
Gigabit speeds at affordable prices streaming services, etc. Many of the gigabit speed bundles
(as seen in Figure 9) also have bundled TV and other OTT
n Open access fiber democratizes gigabit broadband – In (“over the top”) content.
markets with open access fiber, such as Singapore and Italy,
gigabit-speed packages are considered the base packages
that are offered to customers at affordable prices of 25-30€/
month. In markets with availability of wholesale fiber, such
as Spain and Portugal, gigabit speeds are common (although
not always the base package), and prices are in the range
of 40-60€/month. In markets with exclusive fiber operators,
such as UAE and Qatar, gigabit-speed offers are considered
premium packages and are priced at a rate of 300-600€/
month. This observation leads us to conclude that availability
of open access fiber or even wholesale fiber democratizes
gigabit broadband access in terms of high-speed availability
and affordable monthly prices.

10
3. Success factors observed in open access
fiber business models

We have observed some recurring success factors in recent n Ensuring high fiber uptake by signing up all key players in
open access fiber business models: the market as wholesale customers. This implies that all key
retail telco players (in some cases, even the incumbents)
n Obtaining multi-party investment, not only from telco
sign up with long-term contracts to use wholesale fiber.
players but also from non-telco players, such as energy
In the best case, the retail companies also announce that
companies, infrastructure funds, etc. As we mentioned
they would stop rolling out their own competing/overlapping
earlier in this report, non-telco entities invested multi-billion
fiber with the open access fiber company (as Vodafone Italy
euros in open access fiber transactions in Europe in 2019;
announced in 2018 after its wholesale deal with Open Fiber).
we expect this trend to continue into 2020 and beyond.
n Leveraging expertise of entities outside the telecom
ecosystem for efficiently rolling out fiber. Typically, energy
companies, municipalities, real estate companies, etc.,
have more expertise than traditional telecom companies in
rolling out fiber, including skills such as project management
across multiple entities, resolving local bureaucratic hurdles,
ramping up staff and redeploying staff from one region to
another. Open access fiber operators also tend to use new
technology-enabled tools such as autonomous cars that
drive around a targeted region collecting GIS data to assist
in rollout planning and demand aggregation, with inputs
from multiple telcos to identify the best areas to roll out,
ultimately leading to timely rollout at lower unit costs.

11
4. Strategies pursued by telcos in reaction
to increased interest in open access fiber

Incumbents attempt to maintain or retake the lead Cable companies avoid getting squeezed by
incumbents on one side and open access fiber
We have observed incumbents attempting to maintain
challengers on the other side
or retake the lead in shaping the fiber roadmaps for their
respective countries (as seen in Figure 10). Although
Cable companies historically have benefited from superior data
incumbents have traditionally resisted partnering with other
speeds as well as low churn rates of their subscribers compared
entities or opening their fiber networks for wholesale services,
to other fixed broadband products like xDSL. But with gigabit
we see some incumbents warming to the idea of taking a role in
FTTH, cablecos are now increasingly being challenged on
establishing open access fiber infrastructure.
multiple fronts.

There have been rumors of strategic moves by multiple

Cablecos usually sell their services using their own retail brand,
incumbents in Europe in this direction, and we believe many
while open access fiber operators resell services to multiple
new fiber deals will be announced soon by incumbents in
telcos, giving telcos a much higher chance of achieving higher
Europe that are either partnering directly with challenger
utilization of their fiber network. This increased utilization
open access fiber entities or are partnering with other non-
leads to overall better economics compared to cablecos’ cable
telco entities to roll out large-scale open access fiber in their
networks.
respective countries. (An upcoming Arthur D. Little report will
provide further details on incumbent fiber strategies.) Typical cable networks consist of multiple active components,
which inherently require higher operations/maintenance and
Shutting down the legacy copper network is another strategic
energy costs versus fiber networks, which have a higher share
advantage of rolling out a nationwide fiber network, which we
of passive components that are easier to operate. Consequently,
assess in detail in Arthur D. Little’s upcoming edition of “Race to
cable networks eventually succumb to cost disadvantage when
Gigabit Fiber 2020.”
competing with fiber-only networks. Additionally, to deliver
gigabit speeds to customers, cablecos have to plan for a new

Figure 10: FTTH/B deployment by type of player

Breakdown of FTTH/B deployment by type of player

Europe, 2011–2018, in %

8% 4%
21%

41%

2011 2018

55%

71%

Incumbents Alternative ISPs Municipalities/Utilities

Source: FTTH Council Europe, Arthur D. Little

12
wave of CAPEX to upgrade their infrastructure to Docsis 4.0, providers in Germany. In Italy, Vodafone IT was previously
whereas FTTH networks can already deliver gigabit speeds and investing in building its own FTTC network. However, after
symmetric speeds. its deal with Open Fiber in 2017-18, Vodafone IT announced a
stop to all future FTTC investment, relying exclusively on Open
Moreover, the use of videoconferencing, real-time collaboration Fiber’s FTTH network for nationwide coverage. In the UK,
tools and cloud-based services is constantly on the rise, Vodafone UK has struck multiple agreements with Openreach,
implying that not just high speeds but also symmetric CityFibre and others to expand its fiber footprint. In Ireland,
connectivity with low latency are required. The recent COVID-19 Vodafone co-invested, along with the electric company ESB in
crisis has given a strong impetus for the use of these tools, and SIRO to roll out open access fiber.
we believe the adoption of remote working tools will continue
to increase after the pandemic. Fiber networks have a better
New opportunities for non-telco companies
performance compared to cable networks when it comes to
symmetric high speeds with low latency. Open access fiber is opening up new opportunities for non-
telco companies, like energy companies, municipalities,
Given the above challenges cablecos face, and with increasing infrastructure funds and others, to invest in future nationwide
fiber rollout by competitors, cablecos are also directly or critical infrastructure – often with positive government support.
indirectly obtaining access to fiber. Some cable companies, such Although the quantum of investment is large, open access fiber
as Vodafone, are tactically extending their footprint with whole- offers long-term stable cash flows and higher multiples, thus
buy agreements with other open access fiber providers, such offering an attractive alternative to traditional telecom equity or
as Deutsche Glasfaser. In another example, StarHub SG is using debt investment. Italian utility Enel, through its investment in
the open access fiber available in Singapore for its customers Open Fiber; ESB in SIRO Ireland; DeltaFiber in the Netherlands
and is reported to have decommissioned its cable network in and Germany; KKR in Deutsche Glasfaser, etc., have all seen
2019. high valuations, as illustrated earlier in Figure 6. Non-telco
firms are also taking active interest in owning parts of the fiber
Challenger telcos proactively forge partnerships network, as seen in the interest in the ongoing Bouygues fiber
or whole-buy agreements with open access fiber transactions of two sub-projects in France.
entities
We are seeing challenger telcos increasingly cooperate
with open access fiber entities as they seek to benefit from
wholesale access to gigabit broadband networks. Theoretically,
the greater the number of telcos signing up with long-term
wholesale contracts with open access fiber providers, the higher
the probability of success of low-cost rollout and higher gigabit
broadband penetration in that market.

In Italy, for example, Open Fiber signed whole-buy agreements

with almost all challenger telco operators in the first years of
its launch, enabling it to scale up its business from a regional
provider focusing on a few regions in northern Italy to a national
entity with nationwide rollout plans. Such large-scale scale-up
is not without operational, financial and political challenges.
Thus, we are observing with keen interest the fiber market
developments in Italy.

As another example, Vodafone has used a mix of all the above

strategies to improve its access to gigabit fixed infrastructure.
In Germany, Vodafone DE followed the M&A route to gain
a strong foothold in the fixed infrastructure market with its
acquisition of Kabel Deutschland seven years ago. Vodafone DE
is continuing to expand its footprint with whole-buy agreements
with Deutsche Glasfaser, inexio and other regional fiber network

13
Conclusion

We believe open access fiber will continue to gain steam If we assume that the deal volume in 2020 will be approximately
and fresh investment will pour into this market in the coming 60€ billion (similar to the volume in 2019) and assume a similar
years. Incumbents, cable companies, challenger telcos and 40 percent of share of fiber or open access fiber in the total
non-telco entities like energy companies, municipalities and deal volume, we predict funding of 24€ billion going into the
PE/infrastructure funds all have key roles to play in building fiber sector in Europe. Assuming an average of 1000€ CAPEX
sustainable nationwide gigabit fiber in their respective markets. required to pass a home with fiber, this implies 24 million new
Proactive moves from some Telcos like Vodafone DE or non- homes can be passed with fiber in 2020 alone. To put this in
telcos like Open Fiber have placed them in a leading position in perspective, the whole of the UK or France can be passed
shaping the gigabit future of their markets. Incumbent telcos with fiber in just one year. As availability of open access fiber
have made and are continuing to make big moves, as rumored increases, we will see a proliferation of multi-gigabit offers
in Italy and a few other European markets. in the market delivered over FTTH, as we have already seen
in Singapore and which are also occurring in Italy, Spain and
Portugal, among others.

We will continue to watch with interest and report on the

developments in this space in the future.

14
Contacts
If you would like more information or to arrange an informal discussion on the issues raised here and
how they affect your business, please contact:

Austria Japan Singapore

Karim Taga Shinichi Akayama Tomasz Izydorczyk
taga.karim@adlittle.com akayama.shinichi@adlittle.com Izydorczyk.Tomasz@adlittle.com

Belgium Korea Spain

Gregory Pankert Kevin Lee Jesus Portal
pankert.gregory@adlittle.com lee.kevin@adlittle.com portal.jesus@adlittle.com

China Latin America Sweden

Yusake Harada Guillem Casahuga Agron Lasku
harada.yusake@adlittle.com casahuga.guillem@adlittle.com lasku.agron@adlittle.com

Czech Republic Middle East Switzerland

Lukas Vylupek Andrea Faggiano Michael Opitz
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