Over three-quarters of investors expect Fibre to the Premises (FTTP) investment to increase over next 24 months

• Nearly one quarter (23%) of investors believe pandemic has led to a higher FTTP project roll-out
• Germany, the UK and Poland are the most attractive locations for future FTTP investment, with low penetration levels, high end-user demand, and government incentives
• 84% of respondents expect infrastructure funds to be most active in acquiring FTTP operators over the next 24 months

In a sector traditionally dominated by major telecoms players – infrastructure and institutional investors will increasingly turn their attention towards digital infrastructure assets and the global rollout of fibre broadband, in particular Fibre to the Premises (FTTP), according to the latest Building a Full Fibre Future: European FTTP Investment Trends 2021 report by global law firm DLA Piper and specialist intelligence provider, TMT Finance.

Eight in ten (84%) respondents consider infrastructure investors will be among the most active in future FTTP projects, while less than a third (29%) believe telecom operators will be active over the same timeframe – a decrease of 15% in comparison to the last 24 months.

Pension funds will also become more active in the FTTP investment space according to investors – an increase from 20% over the last two years – to 27% over the next two. Both infrastructure and pension funds are looking to make investments, resulting in an increase in deployment and an acceleration of planned and new roll-outs.

A rise in home working due to the COVID-19 pandemic has led to an increase in demand for ultra-fast broadband connections – as over one-quarter (28%) believe the ongoing pandemic has led to higher FTTP project roll-out and more appetite from investors in Europe.

In terms of investment, over three-quarters (78%) of respondents expect the overall value of FTTP European investment to increase over the next 24 months. Of these, nearly one-quarter (23%) expect to invest between EUR500m to EUR1bn, while an additional 14% will invest more than EUR1bn.

Overall, the top three countries for future investment in FTTP are Germany (26%), the UK (21%), and Poland (15%) due to low penetration levels, high retail average revenue per users (ARPUs), high end-user demand, and government incentives.

Signalling that the market is attractive for future investment, two-fifths (41%) believe the costs of financing FTTP projects are lower compared to other sectors, as favourable financing conditions are expected to persist. In particular, low FTTP penetration is a primary reason the UK is an attractive investment target.

However, the risk of overbuilding (40%), regulatory complexity (26%), and competition with other investors (26%) are some of the biggest obstacles to future FTTP investment.

Commenting on the findings, Mike Conradi, partner and global co-chair of DLA Piper's telecoms practice, said: "The COVID-19 pandemic has accelerated technology and infrastructure requirements. A combination of demand for ultrafast broadband, supportive government policies, strong commercial take up, and sustained lending and investment appetite from banking and specialist institutions, is making FTTP increasingly attractive in Europe.

Our survey reveals that whilst there are a broad range of business models which are of interest – looking at factors like geography, scale, degree of subsidy, speed and cost of construction, and route to market, there's a consensus that we're only at the early stages in the investment cycle, with at least another five years or so to run – and infrastructure funds have significant dry powder."

DLA Piper partner and global co-chair of infrastructure, Martin Nelson-Jones, said: "The UK government's recently published National Infrastructure Strategy reinforces the importance of FTTP, outlining that the UK will need GBP30bn in FTTP investment over the next five years, as well as reinforcing government support to private investment."

Martin added: "Our survey highlights that 43% of respondents expect to be involved in five or more FTTP related M&A transactions over the next 24 months, with strong interest from infrastructure funds. This high level of expected activity is consistent with DLA Piper's recent experience in the market."

The full report can be downloaded here. 

Methodology:

Survey carried out Q3 2020 by TMT Finance, on behalf of DLA Piper. 62 senior executives surveyed. Respondents represent major investors, lenders, operators and advisers to the FTTP sector. Their companies are headquartered from across Europe, including the UK, France, Ireland, Germany, Austria, Switzerland, Spain, Italy, the Nordics, CEE – as well as from key overseas countries such as the US, Canada and Japan, all with a strong presence in the European market.

Of the 62 respondents, 33% were from investment banks (lending and advisory); 25% were from specialist professional advisory (M&A advisory, management consultancy, due diligence); 21% were senior industry executives (telecom operators, fibre operators); 15% were from investment firms (private equity, infrastructure funds and other asset management) and 6% were classed as ‘other', including network vendors.