Energy efficient FTTH network prompts €1bn Telefónica fund

In the name of a more sustainable economy but with potentially cynical undertones, Telefónica has launched its first green bond issue (a type of fund created for environmentally-friendly projects) worth €1 billion ($1.14 billion) over five years, pertaining to its fiber to the home (FTTH) broadband network which it claims is 85% more energy efficient than copper. This effectively translates as Telefónica hyping up its FTTH business to get its hands on cheaper money at lower rates – and quite clearly the Spanish incumbent has set the bar for other operators to follow suit.

The operator’s self-proclaimed “greenest network in the market” has saved 208 GWh over the last three years, equating to 56,500 less tons of CO2 in the atmosphere, in turn equivalent to the carbon captured by over 900,000 trees, it claims. Good guy Telefónica has also committed to recycling all the material from the closures of its copper central offices, promising to do so at the rate of one a day – which could prove embarrassing for operators who continue to neglect copper networks. Of course, we are skeptical of Telefónica’s supposed squeaky clean record, particularly outside its native Spain.

Telefónica has managed to swerve laying out any detailed long-term plans publicly, merely stating it plans to finance further efficient energy projects. The proceeds could be used, Telefónica states, “for existing projects (no older than three years) and future projects.” Of course, some of the €1 billion will be put towards extending the average life of Telefónica’s debt.

We risk veering way off course from our core video focus, yet the pressure on technology companies over the coming years to transform their businesses into incredibly energy efficient, well-oiled and finely tuned machines will only increase. Addressing this however possible is therefore imperative for everyone in technology, and the infinitely fine margins in our industry could be decided by those operators and vendors who committed to green initiatives early on.

That said, tier 1 titans like Telefónica must set precedents. The Spanish operator says the migration to fiber has allowed it to consolidate its telecommunications network as one of the most sustainable in the market in terms of energy and CO2. Despite traffic soaring by 107% over the last three years, Telefónica says it has managed to stabilize its energy consumption, with over 50% of its electricity drawn from renewable sources.

We know Telefónica’s Movistar leads the Spanish FTTH market with a dominant 46.5% share, with approximately another 43% shared between Orange (including Jazztel) and Vodafone (including Ono). A recent report from Spain’s competition regulator CNMC reveals the country added 2 million FTTH lines during 2018, peaking in November with 203,000 connections, to total 8.4 million FTTH lines, while DSL lost 1.3 million lines. The indirect access service NEBA (FTTH and copper) has accumulated just over 1 million lines, of which the majority (966,517 precisely) are fiber.

So, Movistar boasts almost 4 million FTTH lines and growing at a steady rate, and this latest green bond news should serve as an incentive for Orange and Vodafone to increase FTTH infrastructure investments.

Significantly, Telefónica says the transaction marks the first green bond issuance in the telecommunications sector and the first for a Spanish company so far this year. Diving into the green bond, more than 310 investors participated following a sustainable financing framework presentation from Telefónica, of which close to 50% were green investors.

“The company is already 100% renewable in Europe and Brazil, thus approaching its goal of being renewable in all countries by 2030. And it has reduced its CO2 emissions by 28% in three years, with the commitment to cut them by 30% to 2020 and 50% by 2030, in line with the Paris Agreement,” said a Telefónica statement.