Fibre Investment: Introduction 

The investment landscape for fibre in Europe, as reported by the FTTH Council Europe's Investors Committee in collaboration with Macquarie, is marked by dynamic developments despite a discernible decrease in activity in 2023 from the previous year’s peak.  

The European fibre rollout continues to gain substantial support from financing, even in the face of rising interest rates, overbuild risks, and increased competition. Specifically, the market has witnessed a variety of country-specific transactions, including notable financings such as Vodafone/Altice's raising of €1 billion, signalling a sustained drive toward expanding high-speed connectivity despite economic headwinds.  

The figures above underscore the sector's resilience and the strategic importance placed on fibre infrastructure as a cornerstone for future-proof digital economies​. 

The Fibre Broadband Promise 

The fibre broadband sector stands as a beacon of growth, with data traffic projected to increase by roughly 20 percent annually over the next five years. Fibre is the only fixed-broadband technology currently capable of meeting the speed and capacity demands, offering up to 10 gigabits per second, outstripping older DSL and cable technologies and outpacing even the latest mobile and satellite offerings.  

The four key investment opportunities identified by McKinsey* include: 

• Vertically integrated models, which control the full value chain from network to customer. 

• Independent infrastructure models, focusing on wholesale operations. 

• Open access models, which offer network access to multiple service providers. 

• Customer relationship models where operators focus on service provision rather than network ownership. 

These opportunities are flanked by impressively high EBITDA margins, where broadband providers to consumers can see margins above 40 to 50 percent, and those offering wholesale services can achieve margins up to 70 percent.  

As we can see, the current European market scenario, where millions of households are yet to be connected with fibre, translates into a vast capital deployment opportunity. 

Investment Opportunities and Risks

Investment opportunities within the fibre sector are diverse, strongly influenced by local market conditions. McKinsey* delineates these into three distinct categories: Greenfield, Acceleration, and Mature markets. Greenfield markets, such as in parts of Asia, Africa, and some Western countries including Germany, Greece, and Belgium, account for $253 billion of the envisioned spending, due to their substantial capital requirements for fibre connectivity.  

Acceleration markets, like the UK and Austria, have a moderate fibre coverage and necessitate investments of around $131 billion to reach full coverage.  

Mature markets, with over 60 percent household fibre access, present a $39 billion investment potential primarily focused on rural areas and network upgrades from hybrid fibre-coaxial systems. These variances emphasise the need for tailored investment strategies to navigate the inherent risks and capitalise on the unique opportunities within each market​. 

Detecon's View on Fibre Investment

Detecon's analysis* in the post-pandemic era points to fibre optic investments as a resilient avenue for shareholder returns amid the economic uncertainties of 2023. Investment volume in 2021-22 saw a significant increase, with a disclosed $72 billion across 108 deals, reflecting a ~40 percent rise from pre-Covid levels. The focus on securing demand, optimising deployment strategies for cost-efficiency, and seeking alternative low-interest financing, like subsidies or ESG vehicles, are pivotal in maintaining investment attractiveness.  

Europe stands out as a mature market, drawing 53 percent of tracked investments, with notable ventures like FibreCo in Germany planning a $7 billion investment for seven million new connections. This suggests a strategic approach in fibre investment, balancing aggressive expansion with prudent financial planning to navigate the evolving landscape. 

In summary, the European fibre investment landscape, despite facing economic challenges in 2023, continues to demonstrate resilience and strategic importance. Backed by insights from the FTTH Council Europe, McKinsey, and Detecon, the sector promises high returns and a range of investment opportunities in Greenfield, Acceleration, and Mature markets.  

Looking ahead, the FTTH Council Europe will continue to be an essential source for the latest developments in this rapidly evolving sector. We will publish more comprehensive reports and news, particularly on fibre investment and other crucial subjects. Among these is our latest "Investment Tracker," a key publication updated twice a year, which provides insights into the sector's developments. 

Becoming a member of the FTTH Council Europe is an excellent way for investors and industry professionals to stay informed and ahead of the curve. Membership offers access to exclusive insights, networking opportunities, and the latest industry data, helping you make well-informed decisions in this dynamic investment landscape. Join today to be part of shaping the future of Europe's digital infrastructure. 

Notes: 
https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/fibre-opportunity-four-deal-types-for-investors-to-consider 
https://www.detecon.com/en/journal/need-speed-opportunities-and-risks-fibre-optic-investments