Episode 4: the Investors Committee


Thomas Miller, Chair of the Investors Committee of the FTTH Council Europe, shares his perspective on the evolution of the FTTH business in the months to come. While providing guidance to those willing to navigate their way to profitable investments in full-fibre networks, Thomas also presents some of the activities we can expect from the committees in the near future. In this episode, our guest will answer to these questions and much more:

  1. How do you see FTTH investments in Europe evolving in the next 12 months?
  2. From an investor perspective, what are the key factors you keep into account while assessing fibre networks financing?
  3. It looks like financing fibre optics is becoming more difficult nowadays: how can investors and entrepreneurs successfully navigate their way to profitable investments?
  4. What can you tell us about the upcoming initiatives from the Investors Committee?

Read the full interview below to get the answers to these questions.

 

How do you see FTTH investments in Europe evolving in the next 12 months?

Over the past decade, the European fibre sector has attracted billions of euros in investment. Thus, many investors have built up large exposures in the fiber sector, often to their limit. Which is a technical reason why the market for fibre investment in 2023 has become more challenging. More importantly, the mentality of "build and they will come" is clearly outdated. In some regions, providers are struggling to meet their economic targets.  

Overall, investors are taking a much closer look at fibre operators than they were a year ago. This makes it difficult for some providers to raise the funds they need.

Existing players may have to rethink their growth strategy and think about cooperating with competitors or even cutting costs and optimizing processes. In the UK and Germany in particular, we are likely to see more restructuring. Mergers, acquisitions, and joint ventures will enter the stage. It’s climate change, if you will. 

In the picture on the right, Thomas Miller moderating "Panel 5 - Investors Panel" during the FTTH Conference 2023 in Madrid.

From an investor perspective, what are the key factors you keep into account while assessing fibre networks financing?

Clearly, investors require a good track record. The focus is much more on ARPU and how many of the homes passed have actually signed up. Speaking of “homes passed”, this KPI has lost much of its relevance. If anything, investors are looking at “RFS” (“ready for service”). But, to reiterate a key fact, investors are paying much more attention to cash generation today than they did in 2022, which means greenfield investments (i.e., investments with no track record) are often off the radar.

Investors are also much more aware of vendors' business models, especially when comparing wholesale to retail. They also value providers adapting to the "climate change" that has gripped the fiber landscape. This means some are likely to support reasonable plans on how to successfully address the challenges ahead. Such support may include short-term extensions of debt or accommodating waiver requests.


It looks like financing fibre optics is becoming more difficult nowadays: how can investors and entrepreneurs successfully navigate their way to profitable investments?

I didn't mean to sound overly pessimistic. Fibre is a key technology for Europe, we need this infrastructure. There is therefore no doubt that we will manage the roll-out overall. Like in every dynamic market opinions, strategies and forecasts are diverging more strongly. In such an environment, it is essential to base decisions on a solid foundation of good information.

The Investors Committee would like to contribute to this with our Investment Tracker, which we produce twice a year together with Macquarie. In it, we show current developments in credit volumes, interest rates, KPIs, covenants and information requirements for the main European regions.

In addition, our Guide to Successful Fibre Business Models provides a good overview of the business models relevant on the market. These differ significantly in terms of opportunities and risks and thus in the structure of an investment.

 

What can you tell us about the upcoming initiatives from the Investors Committee?

It is certainly not easy to keep track of things in the current environment. But that is precisely why our approach is not fatalistic. We firmly believe that the future can be shaped. To this end, it is more important than ever that entrepreneurs and investors talk to each other. We have our Investors Committee for this exchange. With the Investment Tracker and the Guide to Successful Fibre Business Models, we continue to produce decision-relevant information. However, sensemaking is also important, and that is what we do in the dialog between our committee members.

 

More about Thomas Miller


 

 

Since 2006 at Hamburg Commercial Bank, Executive Director. Publisher of several studies on fiber financing. Writer and speaker for bank financing. University lecturer at Hamburg School of Business Administration and International School of Management. Head of the FttH Council Investors Forum.

 

Unlocking a greener Europe with energy-efficiency labelling of broadband equipment

Nov 29, 2022
Company type: | Vendor/Reseller (Products) |

Member company: S&T Isktratel
Country or geographical scope: Global
Period: 2022 and beyond
Company type: Vendor/Reseller
Product/service category involved: All broadband equipment

Abstract

To make environmentally responsible decisions, network operators need credible figures about power consumption of the broadband equipment they procure and use.

The introduction of energy-efficiency labels allows them to make well informed decisions and reduce their carbon footprint. The labels state a product's power consumption and the level of compliance with the Code of Conduct on Energy Consumption of Broadband Equipment as a framework for providing credible and comparable data.

S&T Iskratel believes that the whole broadband industry needs to join the initiative, help operators effectively reduce the environmental impact, and take a positive step towards a greener Europe.

Context

With the explosion of data traffic and the energy consumption of data transmissions increasing, undertaking steps to reduce the carbon footprint is the responsibility of the entire telecoms industry. In their effort to reach net zero emission targets, operators' attention has rightly shifted to utilising solutions that are more energy efficient: switching from copper to fibre [1][2], and selecting PON over P2P [3][4].

To make environmentally responsible decisions, operators need credible and comparable figures about power consumption of the broadband equipment they procure and use. At present, however, they have no tools to compare the products – they can receive data from equipment vendors, but there is nothing to help them compare the power-consumption figures. Even worse, they get exposed to misleading information and greenwashing.

Greater levels of transparency are needed.

The task for the entire telecommunications industry – and equipment vendors in particular – is to provide credible and comparable data about power consumption, and facilitate well-informed decisions that will help operators reduce their carbon footprint and environmental impact.

Solutions

The broadband industry already has the framework for credible and comparable power consumption figures in place: The Code of Conduct on Energy Consumption of Broadband Equipment [5] published by the European Commission's Joint Research Centre.

Specifically, the Code of Conduct (CoC) sets the limits of power consumption of broadband equipment, and specifies the test methodology. All (voluntary) signatories commit themselves to achieving the power consumption targets, and to publicly disclosing power consumption of their broadband equipment.

After having signed the Code of Conduct in early 2022, S&T Iskratel has fully committed itself to ensuring that its broadband-access equipment complies with the limits on power consumption imposed by the code, and to providing full disclosure and transparency to customers, users and general public.

For the operators, credible power-consumption figures are the first piece in the puzzle. S&T Iskratel has decided to make a step forward and provide also the “missing piece of the jigsaw” to unlocking a greener Europe and reducing operators’ carbon footprints, and introduce energy-efficiency labels.

In addition to power consumption (which is measured following test methods in the CoC), the labels state the product's level of CoC compliance, provided as a percentage of the limit set by the CoC. Similar in design to those used for energy classes of domestic appliances, the labels are easy to read and understand for operators and end-users alike.

The two labels below provide examples for labels of a compact OLT and of a home gateway.

S&T Iskratel is committed to label all its new broadband equipment; specifically, Iskratel Lumia optical line terminals and Iskratel Innbox customer-premises equipment. The labelling improves credibility and comparability, and allows operators to make well informed decisions when selecting products to put into their network.

S&T Iskratel believes that undertaking the steps to reduce the global warming is the responsibility of the entire telecommunications industry, and that everyone in the value chain – vendors, operators, end users, regulators and authorities – must participate in reducing the carbon footprint of their activities.

S&T Iskratel repeatedly calls on the whole industry to join the initiative and take a positive step towards a greener Europe with industry-wide adoption of energy-efficiency labelling. This will help operators and end users correctly estimate the contribution of electricity generation to their overall carbon footprint, and effectively reduce their negative impact on the environment.

Results

Since spring 2022 when the initiative was first presented, S&T Iskratel received impressively positive feedback from European operators. Their interest has proven that they understand their responsibility in contributing to limiting the global warming, and that they understand the role of their equipment vendors in the supply chain.

Besides lower carbon footprint as a result of deploying lower-consumption equipment, operators benefit from lower electricity costs. As a standout example, an established and rapidly growing full-fibre operator has realised that the investment in switching to S&T Iskratel's OLTs with record-low power consumption returns in 3-5 years, solely thanks to the energy savings. The operator's investment decision was based (also) on credibility of figures on the product's energy-efficiency label.

Conclusions

While operators understand that switching from copper to fibre (and to PON in particular) can reduce their energy consumption and the related carbon footprint by orders of magnitude, they still lack the tools to compare various vendors' products. Widespread, industry-wide adoption of energy-efficiency labelling will address the need, allowing operators to follow their sustainability strategy, avoid the traps of greenwashing and base decisions exclusively on credible and comparable data.

Further reading

[1] Whitepaper "Telecom Environmental Sustainability", https://www.iskratel.com/en/resources/white-papers-and-articles/telecom-environmental-sustainability

[2] Blog "Environmental sustainability: Are you a part of the solution?", https://www.iskratel.com/en/resources/industry-insights/y2020/m04/1159-Environmental-sustainability-Are-you-a-part-of-the-solution

[3] Whitepaper "FTTH: A Catalyst for Sustainable Action", https://www.iskratel.com/en/resources/white-papers-and-articles/ftth-a-catalyst-for-sustainable-action

[4] Blog "Deploying the right fibre-access technology to unlock a more sustainable future", https://www.iskratel.com/en/resources/industry-insights/y2021/m11/1312-Deploying-the-right-fibre-access-technology-to-unlock-a-more-sustainable-future

[5] Code of Conduct on Energy Consumption of Broadband Equipment, https://e3p.jrc.ec.europa.eu/publications/eu-code-conduct-energy-consumption-broadband-equipment-version-80-current-version-valid

Contact

Tomo Bogataj, Head of Broadband Marketing, S&T Iskratel
t.bogataj@snt-iskratel.si

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