In this article, we consider and analyse a small variant of a functional originally introduced in [9, 22] to approximate the (geometric) planar Steiner problem. This functional depends on a small parameter ε > 0 and resembles the (scalar) Ginzburg-Landau functional from phase transitions. In a first part, we prove existence and regularity of minimizers for this functional. Then we provide a detailed analysis of their behavior as ε → 0, showing in particular that sublevel sets Hausdorff converge to optimal Steiner sets. Applications to the average distance problem and optimal compliance are also discussed.