The missing linkThe role of entrepreneurial capital in delivering future-

proof broadband

James EnckBudapest, 04/12/13

Who am i? Recovering sell-side analyst Migrated to principal investing at Merrill Lynch Corporate development consultant to CityFibre

(UK) and BB Glasfaserfonds (DE) Analyst/advisory roles with OECD, KPN, Wentworth

Capital, Seim & Partner, Diffraction Analysis, and Telco 2.0

Principal recent activities around fiber infrastructure, towers and datacenters

Produce occasional rants at eurotelcoblog.blogspot.com

2012 European FTTH/B rankings

Two notable names are missing – UK and Germany, each below 1% penetration

Source: IDATE/FTTH Council Europe

Punching below its weight50-90%

< 10% 10-50%

> 90%Europe’s largest and strongest economy

Consistent innovator in advanced and precision engineering and alternative energy technology

Excellent transport infrastructure

Very high levels of internet adoption

FTTH/B penetration in 2012 0.5%

Huge East/West and urban/rural divides in availability of >50Mbps broadband

Source: BBP

Punching below its weight

Source: Point-Topic, Akamai, CityFibre

Principal global financial and media center

European hub for international IP transit and home to major concentration of data centers

Highest level of economic reliance upon the internet among the G-20

Very high levels of internet adoption

FTTH/B penetration in 2012 0.06%

Huge North/South and urban/rural divides in availability of >24Mbps broadband

The third wayDelivering ubiquitous FTTH/B in both Germany and the UK estimated to cost €80 – 100bn

Current levels of incumbent investment don’t come close

Cable networks patchy and not expanding footprints

The only answer is from third party, entrepreneurial capital

Successful precedent

Source: Reggefiber

Reggefiber has invested c.€1.5bn over 10 years deploying FTTH networks in smaller towns and cities in Holland. Network covers >20% of all households.

Company employs a successful pre-build demand aggregation program, ensuring penetration is at least 30% at launch. Earlier projects now 50 – 80%.

Has drawn significant investment from the national incumbent and loans from EIB/Dutch banks.

Changing the UK status quo

Hyperoptic (founded 2011)

Delivers up-to-gigabit services to large-scale MDUs in major urban centers

Anchor relationships with landlords/tenant associations and demand aggregation

Targets >500,000 households connected over the next five years

Received £50m investment from George Soros’ Quantum Strategic Partners fund.

Changing the UK status quo

Gigaclear (founded 2011)

Delivers gigabit services to small (but highly affluent) villages in rural England, with poor DSL and no cable

Replicates best practice in pre-build demand aggregation from Holland/Nordics

Active in nine communities today, pipeline of hundreds

Agreement with wholesale platform to increase service provider diversity

Changing the UK status quo

CityFibre (founded 2011)

Acquired legacy fiber assets in >50 towns and cities

Anchor contracts with systems integrators serving the public sector for transformational metro fiber networks

York network (pictured) now covers 111km and serves 179 endpoints

Similarly-sized network now contracted in Peterborough

Strong platform for FTTH/B extension?

Changing the DE status quo

BBP a.k.a. BB Glasfaserfonds (founded 2012)

Strong team of telco/SI/financial veterans acts as fund manager

1,400 communities (limited cable, poor DSL) fall into the investment parameters, deployment hierarchy driven by ROI

Significant buy-in from incumbent service providers; ultimate goal is wholesale migration of existing DSL/PSTN customers

Significant mitigation of build risk

Einwohner (Mio.) Gemeinden0%

10%20%30%40%50%60%70%80%90%

100%

22

9,755 28

1,389

33

187

>50.000

10.000-49.999

0-9.999

German population and communities by community size

The third and only way Two of Europe’s leading economies lack broadband

infrastructure commensurate with their economic and political status

There is an investment gap of tens of billions of euro in delivering ubiquitous fiber access to UK and German citizens and businesses

Current infrastructure players face cannibalization risk, and can’t finance a total refresh of their infrastructure, even if they wanted to do it...

The gap will be plugged by third party, entrepreneurial capital, targeting specific market niches

Successful models mitigate construction and demand risks by locking in customer commitment pre-construction, and delivering a guaranteed minimum utilization level which gives investors comfort