Vodafone Struggles After Announcing German JV With Altice

By Geoffrey Smith 

Investing.com -- Vodafone (LON:VOD) stock struggled to make headway in Monday trading, underperforming both its national market and the broader European telecom sector after announcing a new joint venture in Germany with French-based Altice.

The U.K. mobile provider's stock rose only 0.4%, on fears that the company may be giving up at least a part of its future income streams by bringing in a partner to shoulder the cost of rolling out fiber-based broadband to Germany, its largest market. By contrast, the FTSE 100 rose 0.9% 

Vodafone (NASDAQ:VOD) said it will receive 1.2 billion euros in total from Altice for a 50% stake in the joint venture, which will build and operate a fiber-to-the-home network for around 7 million homes in Germany over the next six years. Around 10% of that will be paid upfront, with most of the rest tied to specific milestones.

The move illustrates the constraints imposed on carriers by the high cost of investment in new infrastructure. Bulking up in Germany had already been the driving force behind Vodafone's purchase of UnityMedia from Liberty Global (NASDAQ:LBTYA) in 2018, and the move indicates that the cash flows from that business still aren't strong enough to cover all its investment needs. 

The joint venture has contracted Geodesia (a subsidiary of Altice) for the majority of the work regarding roll-out construction and maintenance. The new venture is expected to be operational by the first half of next year. 

The JV will offer wholesale access to all telecommunications service providers in Germany, although Vodafone Germany will act as the anchor tenant. It will market the JV's (higher-performance) network to new customers on an exclusive basis, whilst Vodafone Germany's existing network will continue to service customers who don't wish to migrate.