February 10, 2020 / 10:35 AM / 5 months ago

UPDATE 1-EQT, OMERS to buy Deutsche Glasfaser, increasing competition in fibre-optic rollout

(Adds valuation, EQT quote)

By Arno Schuetze

FRANKFURT, Feb 10 (Reuters) - Investors EQT and OMERS have agreed to buy German fibre-optic network company Deutsche Glasfaser from buyout firm KKR, increasing pressure on incumbents Deutsche Telekom and Vodafone to roll out high-speed internet access more widely.

EQT Infrastructure last year acquired peer Inexio and is now planning to merge that company with Deutsche Glasfaser. EQT will hold 51% in the combined group and OMERS Infrastructure 49%, the two investors said on Monday.

The deal, in which EQT beat rival investment firms Antin and Brookfield, values Deutsche Glasfaser at more than 2.5 billion euros ($2.74 billion), including debt, people close to the matter said.

Over the coming years the combined group plans to invest more than 7 billion in the roll-out of high-speed internet infrastructure in rural Germany.

Deutsche Glasfaser, set up by Dutch investor Reggeborgh in 2011 and previously backed by KKR, has a broad national focus and has invested around 1 billion euros in its network since 2011.

It provides high-speed internet access to more than 600,000 households and 5,000 businesses through 30,000 kilometers of fiber-optic infrastructure.

"Deutsche Glasfaser and Inexio currently connect a combined 250,000 homes a year to fibre-optic grids and we are planning to double that in the medium term", EQT partner Matthias Fackler said.

Independent fibre-optic companies have built franchises in German regions and cities, seeking to capitalise on government efforts to build a national network and achieve 'gigabit' speeds.

Both Inexio and Deutsche Glasfaser were put up for sale last summer and suitors had contemplated a combination of both from the beginning.

Deutsche Glasfaser has annual earnings before interest, tax, depreciation and amortisation of more than 100 million euros, according to a person familiar with the matter.

The rollout of 5G mobile involves erecting cells connected by fibre-optic to main mobile masts - enabling rapid downloads and shortening reaction times so that, for example, self-driving cars can navigate city streets safely.

At around 7% of households, fibre-optic penetration is lower in Germany than in countries like the Netherlands, creating pressure on Europe's largest exporter to speed up its rollout to remain competitive.

Innexio and Deutsche Glasfaser have been building fibre-to-the-home connections in underserved parts of Germany, creating de facto local monopolies.

OMERS has also invested in French fiber-to-the-home (FTTH) firm SFR FttH, which last year bought peer Covage. ($1 = 0.9134 euros) (Additional reporting by Douglas Busvine, editing by Riham Alkousaa, Kirsten Donovan)

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