Telecom CEO Tim Höttges views the crisis among the numerous German fiber optic providers with a mild smile — and not without satisfaction. After all, the Bonn-based company had been criticized for its lack of enthusiasm in building this future-proof telecom infrastructure for years. In fact, due to its mega-deal in the USA, which, despite all its advantages, was associated with an investment effort and a significant increase in net debt, Deutsche Telekom struggled to advance the expansion of fiber optics solely on its own. However, it picked up the pace with the help of collaborations and joint ventures when the threat of market share losses from many local and some regional fiber optic providers became too significant.

Meanwhile, Deutsche Telekom has regained control. The reduction of net debt in the corporation is progressing as planned, and as an investment-grade company in the capital market, it continues to enjoy the best possible financing conditions even after the interest rate turnaround. This also provides necessary support to the joint venture Glasfaser Plus, established by Deutsche Telekom in collaboration with the IFM Global Infrastructure Fund. Furthermore, Deutsche Telekom Deutschland is increasingly entering the competition for market share by either overbuilding infrastructure from competitors or simply announcing such plans. The latter alone is often enough to disrupt the return-on-investment calculations of alternative providers.

However, their calculations are not only collapsing more frequently due to the pressure from Deutsche Telekom. Instead, many fiber optic companies are caught off guard by the interest rate turnaround. Germany's less-than-commendable position in the OECD ranking of digital infrastructure, considering its economic strength, has attracted numerous prospectors in recent years. Major private equity players like Allianz Capital or 3i followed pioneers like KKR and EQT in engaging in the German market, either by investing in regional providers or establishing their own entities such as "Unsere Grüne Glasfaser." Financial investors viewed this resilient, so-called passive infrastructure as an ideal asset for high debt leverage, especially during an era of central bank zero-interest policies when even non-investment-grade borrowers could raise capital at relatively low interest rates. The common practice of private equity found industry-wide imitation, but the viability of many business models wavered significantly as financing costs increased, and a cost surge due to inflation, particularly soaring construction costs, eroded cash flows. Currently, the Tele Columbus Group is struggling for survival. Its capital structure with an adjusted debt ratio of 8 times operating income is no longer sustainable.

In addition, the significantly increased capital market interest rates for infrastructure investments have a downside. Institutional investors, who, over the past decade, had successfully raised funds for the new asset class of fiber optics through specialized funds, as it promised relatively solid returns, now have alternatives. Traditional government bonds, in particular, attract with a significantly more attractive risk-return profile.

In the case of fiber optics, risks are increasingly dominating, not only due to the dispute with Deutsche Telekom. Inflation is also impacting customers. Faced with rising costs of living, customers critically assess the subscription of fiber optic connections. The marketing of the connections is only successful at prices that do not refinance the construction costs. Additionally, there is a growing gap between the expansion of households with fiber optics and the actual booking of these connections. Industry associations are advocating for "improved conditions" and calling for the removal of bureaucratic expansion brakes. However, they are unlikely to succeed against the changed dynamics in the capital market.