Deutsche Telekom, EWE to invest 2 billion euros in German fiber buildout

BERLIN (Reuters) - Deutsche Telekom is partnering with EWE AG [LANDWE.UL] to invest 2 billion euros ($2.4 billion) in building out a superfast glass-fiber broadband network in northwestern Germany, the companies said on Wednesday.

Germany, Europe’s biggest economy, has been slow to upgrade its internet infrastructure and lags behind many other developed countries in terms of its households’ access to a fast glass-fiber connection.

Deutsche Telekom and EWE plan to set up a 50-50 joint venture, under a memorandum of understanding, that would connect more than a million households in the states of Lower Saxony, North-Rhine Westphalia and Bremen over the next decade.

Pending cartel office approval, the venture would start its operations in mid-2018, the companies said in a joint statement.

“Through cooperation we can make the buildout of glass fiber much more economic,” said Deutsche Telekom Chief Executive Tim Hoettges, adding that the regional network would be open to third-party providers.

According to research by the Bertelsmann Foundation only 7 percent of Germany’s 40 million households has access to a fast glass-fiber connection.

That compares with 73 percent in Estonia and 53 percent in Spain. Germany ranks 28th out of 32 countries in the Organization for Economic Cooperation and Development’s league table of access to fast internet.

Germany’s powerful engineering industry has blamed Telekom’s reliance on ‘vectoring’ - or tweaking old copper-wire connections to increase data transmission speeds - that it views as a poor alternative to glass fiber and a threat to its export competitiveness.

Germany has yet to settle on a regulatory regime for glass fiber, creating a dynamic competitive environment in which telecoms, glass fiber specialists, utilities and municipalities are forging alliances.

Telekom argues the market should not be regulated at all.

“This framework is a precondition for the implementation of this joint project, and to that end we are in contact with the Federal Network Agency,” Hoettges said.

The agency has said it would adopt a light-touch regime for glass fiber.

Wednesday’s agreement marks the culmination of talks that EWE had disclosed back in January, and intensifies competition with rivals including British-based Vodafone, which is also ramping up its investments in Germany.

Germany’s political leaders want to realize the vision of a so-called “Gigabit society” by the middle of next decade, in which every household in the country has a high-speed internet connection.

Glass fiber will be vital to the operation of fifth-generation mobile services due to be launched from 2020 onwards, supporting new technologies such as driverless cars and “smart” home appliances.