Vodafone DE's Gigabit Investment Plan

Vodafone DE launches Gigabit-Offensive, or Gigabit Investment Plan: EUR 1.8-2.2b in 4 yr (18/19 - 21/22), for 1/3 of all HH: 13.7m connections.

3 pillars

• GigaKabel (Cable): 12.6m HH; EUR 200m (excl CPE); accelerates Docsis 3.1 deployment from 4 to 2 yr; target 0.5-1.0 Gb/s.
• GigaGemeinde (Municipality): rural, 1m HH = 2m pops, FTTH; EUR 200-400m; requires 33% participation; muni to own passive and apply for subsidies; Vodafone active operator (incl CPE).
• GigaGewerbe (Business): 100k FTTO in 2k parks; EUR 1.4-1.6b; with partners incl. Deutsche Glasfaser for passive; long-term full ownership of passive; requires 40% participation.

Targets

• IRR minimum 20%
• Pay-back: max 4 yr (FTTO), 6 yr (rural FTTH)
• Contribution to SR growth: 1-2 pp from mid-term (FY 19/20)
• EBITDA-margin above-average/materially higher (currently 34.1%)
• CF impact limited due to coop approach (17/18 limited, then 100-200m EUR/yr)
• Group capex/rev unchanged (mid-teens mid-term) excl Gigabit Investment Plan (disclosed separately)

Observations

• Limited FTTH.
• Smart way of reaping subsidies and sharing cost with partners.
• Focus on (ultimately) vertically integrated model. Not a word about open access.
• Attractive financials.
• Deutsche Glasfaser takeover target eventually (others not clear).
• Cost per connection/household
• Docsis 3.1: EUR 15.87 (excl CPE)
• Rural FTTH: EUR 300 ad mid-point for part of the investment
• FTTO: EUR 15,000