Telekom speeds up fiber optic expansion

Telecommunications - Telekom speeds up fiber optic expansion

Deutsche Telekom has significantly accelerated its fiber-optic expansion. By the end of the year, the fiber optic network should be available in more than 8 million households, more than 2.5 million more than a year earlier, as the company announced on Tuesday. The network has been expanded in almost 3,500 German cities and municipalities. The increase amounted to 1.2 million in 2021 and 2 million in 2022. The Group intends to maintain the current rate of expansion. The target for 2030 is between 25 million and 30 million households. "We are making very good progress," said Telekom Germany CEO Srini Gopalan. The competition is also focusing on fiber optics, but is not as far along as the Magenta Group.

"Fiber to the Home" (FTTH) is considered the best technology for stable and fast Internet. The German government has set the goal of providing nationwide fiber optic coverage by the end of this decade. Other technologies are regarded as obsolete: connections via telephone lines (VDSL) are susceptible to fluctuations and relatively slow. Although television cables are significantly better than the thin telephone lines, they are also susceptible to fluctuations: if the whole neighborhood is streaming in the evening, the connection rate plummets. In addition, data requirements are increasing due to high-resolution films, virtual reality applications and computer games.

User share is still low

Deutsche Telekom's billion-euro expenditure is an investment in the future - at the moment, it is not yet financially worthwhile, as the figures published on Tuesday made clear. This is because many households are foregoing the relatively expensive FTTH contracts. Their existing cheaper connections with lower performance are sufficient for them.

Of the eight million households with Telekom fiber optics on their doorstep, only around one million have accessed it so far - the proportion of users is therefore around 13 percent. In addition, there are 700,000 households that have already signed a contract in the so-called pre-marketing phase. These households are still waiting for the expansion, which is due to take place over the next two years. Once this is complete, they are guaranteed to become customers.

This activation rate is significantly higher for competitors. At the Düsseldorf-based company Deutsche Glasfaser, which had laid lines to more than two million households by the end of September, it is 30 percent. Deutsche Telekom manager Gopalan explained his company's relatively low figure with the fact that availability is being ramped up considerably and the percentage value is therefore inevitably low at first. However, he is convinced that the percentage will be higher in 2024 and 2025.

"Demand is increasing," said Gopalan. The number of fiber optic customers has risen by 60 percent so far this year compared to 2022. "It's increasing quarter by quarter." There were 68,000 new fiber optic customers in the first quarter, 78,000 in the second and 85,000 in the third, so things are clearly on the up - and this trend will continue, Gopalan was convinced.

Vodafone with a late start

While Telekom is forging ahead with fiber optics, competitor Vodafone is struggling to catch up after a late start. For a long time, the company focused on Internet with television cables. The fiber optic business was more of a niche market. Vodafone finally went all out and founded the company OXG with a Luxembourg investment partner in 2022, which began the FTTH expansion in September 2023. In the meantime, OXG has initiated construction projects in 13 cities, where a total of around 330,000 households are to be connected directly to the fiber optic network. The modern lines should be in seven million households by the end of 2029.

Cell phone network is improving

Progress is also being made in mobile communications. Deutsche Telekom's mobile coverage with the 5G radio standard now stands at 96% of households, two percentage points more than a year earlier. Vodafone is at 91 percent. At O2, the figure is more than 90 percent. Deutsche Telekom aims to reach 99% of German households with its 5G antennas by the end of 2025.

In the 5G network, Telekom's competitors have long been using what is known as 5G Standalone (5G SA) - i.e. "real" 5G, which does not use 4G hybrid technology. 5G SA offers extremely low response times. This improvement on the previously used fifth generation of mobile communications could be important for mobile games and for good transmissions in large crowds. Deutsche Telekom has not yet launched 5G SA - also known as "5G plus" - for private customers. This is not due to happen until the second half of 2024. According to the company, only then will it be worthwhile for customers because there will then be enough applications for which 5G SA is also important.

Debate about expansion funding

Part of the fiber optic expansion is made possible by government subsidies. However, the private sector is not very enthusiastic about the fact that billions will probably be available again next year to enable FTTH connections in rural areas and on the outskirts of cities.

In a letter published on Tuesday, several digital industry associations, including the German Broadband Association, demand that the federal government should only provide one billion euros in each of the next three years and not three billion euros as planned. They fear that lengthy application procedures will slow down the expansion overall and that construction capacities will be tied up in lower-ranking projects, although they would be more urgent elsewhere.