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Deploying fibre

Posted by Richard on 17 July 2019 | 0 Comments


As enthusiasm for FTTH comes to the UK, we're seeing what may be a challenging problem for the industry.

We've talked for years about supporting good projects and stopping bad ones as this may create issues for investment going forward.  Now we're starting to see the same issues in the UK and in other countries.

Investors have finally seen that FTTH can provide utility like returns.  However, the experience in project selection is not as deep and without a cornerstone customer (as you'd see with a renewable energy project) the joy of obtatining funding may soon be tempered by the terms of the agreement.

In one project in the UK, the team that acquired the money is already in difficulty in deploying at the promised rate.  It's not easy to deploy but nonetheless, this one project may create a negative investment environment for others.

Either as a result, or more likely due to the inexperience in the sector for funds, the terms being offered are becoming uncomfortable.  One offer would require the project to get above £500m valuation before the founders made a decent return.  That's not a joke or a misprint.  In fact I've lowballed the actual number for the sake of anonymity.

The second way that project investments are being managed is by setting almost ridiculously high demand aggregation targets before a spade can hit the ground.  In one country that number is 55%.   So the investment company can only lose out if the projects go sideways somehow for that particular tranche of investment.

There are a few other structural issues around investment and the next 12 months will be interesting.

We're involved in our own projects in the UK and Africa and will report back on how the investment climate evolves over the next months.