Transform Digital Conference 08-05-2014

1. INCA Event Introduction
A brief survey of fibre finance around the world
8th May 2014
Stefan Stanislawski

2. 2
INCA Transform Digital
Examples of Government financed projects
Australia
• Big bang approach to major
national upgrade
• Urban fibre
• Rural areas various tech
• Incumbent compensated by
sale of customer base area
by area
• Scaled to UK Govt equity
component =£42bn
• High risk big bang project
that seems to have gone
wrong
Qatar
• Government building open
fibre and also aims to buy
already built operator access
fibre in due course
• Entirely State funded but in
unclear policy framework
• Complex politics as
incumbent also largely State
owned and only two
operators licensed in this City
State
Oman
• Open fibre built as “free
rider” on sewerage system
upgrade in capital city by
State concession company
• Oman Broadband Company
(State) being set-up to
manage this asset and
upgrade towers and fibre
across the country
• Cautious step-by-step
approach to remedy market
failure
• Financed by long term loans
from the State

3. 3
INCA Transform Digital
Examples involving both public and private (corporate) finance
Sweden
• $4bn “excess”
privatisation proceeds
kickstarted municipal
fibre in 2003
• Scaled to UK =£17.5bn
• >100 local networks
developed over time
and main operator
strategies
fundamentally changed
• Complex market now
well established - today
~3% homes fibered
each year entirely
privately & customer
funded
New Zealand
• Government put
$1.5bn up to stimulate
private finance of
modernisation - 33
local project areas
• Scaled to UK =£13bn
• 75% to have 100M by
2020. Rural also
improved
• TCNZ agreed to full
structural separation in
order to participate
unlocking 20% of
shareholder value
Europe
• In France >20 cities and
towns have Gigabit
fibre networks built via
PPP deals
• Telecom Italia is in a
couple of PPPs and
considered hiving off
access network into a
NetCo
• Jersey Telecom is State
owned but funded as a
business – 100%
Gigabit Isle fibre
switchover well
underway
USA
• Connect America and
other local initiatives
gathering pace
• USO funds were not
being used for copper
build so will be
targeted at fiberization
• Pilots underway –
policy should emerge
later this year
• FCC supported by
Commerce Dept, long
established rural
utilities finance
organisation etc

4. 4
INCA Transform Digital
Examples of entirely privately financed fibre
Verizon FIOS
• 2005-2010 Upgrade of
copper to fibre passing
13m homes
• Selected areas where
CATV was weak and
customer density
reasonable
• Delivering returns
largely as anticipated.
AT&T copied with u-
verse
• Some regulatory gains
in price regulation in
some States
UAE
• UAE completed the
fibre switchover –
copper scrapped
• Two private but part-
State owned operators
in friendly rivalry
• Business cases driven
by lower opex and
chance to sell new
services
• No CATV competition in
UAE so longer term
also a protective
strategy
Non-CATV Europe
• Fastweb, Italy
• RDS, Romania
• Operator fibre land
grabs in Baltic
States, Slovenia, other
parts of the Balkans
• ~700 Ethernet
operators in Poland
expected to tap EU
funds for ~1000 rural
FTTH schemes
Other Europe
• ~100 small projects in
Germany all funded by
utilities, small
operators etc – no new
equity investors
• Reggefiber in
Netherlands highly
unusual in having a
billionaire sponsor –
now owned by
incumbent and
boosting ARPUs
• Free (Iliad) & France
Telecom deployed fibre
in selected urban areas

5. 5
INCA Transform Digital
If Government funds underwrite a “bankable” deal over time then
taxpayer funds could be multiplied by project finance
£1500 / home @50%
take rate
• 2,500,000 UK rural
homes
• ~£3.7 bn CAPEX in
total
• Government has
£500m to play with
~10 NetCos
• 10-12 NetCos
• Spreads execution
risk
• Allows some
piloting and “tail
end” community
schemes
Bankable
• If major brands
commit …
• to pay £13.50
wholesale charge
growing 2% pa
with inflation
• 50% take-up…
• USO funds
contribute £5 per
month ...
• Requires £600m
Govt support

6. 6
INCA Transform Digital
Observations ….
Government driven big
bang projects often
problematic
Kick-starting private
sector or PPP finance
works
Stable and well
designed regulatory and
policy framework
crucial
USO funds potentially
important and should
be steered towards
fibre
Despite the huge
potential of project
finance to leverage
taxpayer funds we have
not seen it happen - yet