Plenary session financing ftth networks day 1 jan davids

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FTTH Conference Milan 2011 Day 1 Pleanary Session Financing FTTH Networks Jan Davids REFFEFIBER NETHERLANDS

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Plenary session financing ftth networks day 1 jan davids

  1. 1. 15 september 2010Financing FttH Networks Reggefiber FttH Council Europe Conference Milan 2011 Jan Davids Directeur Corporate en Business Development 1 | 19
  2. 2. The Netherlands General ● GDP 2009 € 635 billion (16th largest economy of the world) ● Population 16,5 million ● Households 7,2 million ● Density high ● Total area 42,000km2 (mostly flat and easy to dig) Telecommunications ● Fixed Line Operators ● KPN (Copper, national coverage) ● Cable operators (Coax, national coverage) ● Reggefiber (FttH, roll out started 2005) ● Broadband penetration 85% of Households ● DSL 55% of market, Cable broadband 41%, FttH 4% (source: Telecompaper) ● Trend towards Triple Play and Single Access 2 | 19
  3. 3. Reggefiber(*) and its shareholders Reggefiber Reggeborgh KPN B.V. (59%) (41%) Reggefiber Reggefiber GroupB.V. Group B.V. Reggefiber Shareholders ● Reggeborgh (59%) Private investment company of Wessels family, active in building and construction (VolkerWessels), energy (EVI, Frisol van der Sluis), real estate and building and operating Fibernetworks. ● KPN (41%) Dutch Telco. End of year 2010 KPN had more than 3,9 million fixed line customers, 2,5 million broadband customers and 1,2 million TV customers. FCF in 2010 EUR 2,4 billion, total revenue EUR 13,4 billion. (*) Reggefiber short for Reggefiber Group BV. „Regge‟ to be pronounced as „rɛɣɣə‟. 3 | 19
  4. 4. Strategic rationale cooperation Reggefiber and KPN End of 2008 KPN bought a 41% stake in Reggefiber. The cooperation between Reggefiber and KPN is mutually exclusive in respect to the construction and operation of passive FttH networks in the Netherlands. KPN has the option of increasing its stake to 51%, 60%. KPN will eventually transfer its customers from the Copper network to Reggefiber’s FttH network.Strategic rationale for Reggefiber: ● Reggefiber has been successful in acquiring customers in competition with cable and KPN; cooperation with KPN will further increase the penetration on Reggefiber‟s network and lowers the risks of rolling out ● Offers direct access to large installed customer base for migration to FttH ● KPN is a financially strong and committed co-shareholder ● Provides extensive experience and knowledge of the telecom sectorStrategic rationale for KPN: ● Taking part in Reggefiber is necessary in light of the trend towards single access and maintaining a substantial share of the consumer market ● Reggefiber‟s expertise and experience in building FttH networks in combination with successful existing projects provide KPN with a jumpstart in FttH 4 | 19
  5. 5. Business model – parties involved and value chain Consumer broadband CONSUMERS subscription packages EUR 45– 110 (triple play) SP SP KPN SP SP SP Service Providers Providers Wholesale● Deliver services to consumers agreements● Communicate to consumers Wholesale broadband access EUR 25 – 42 (triple play) Operators Reggefiber 3rd party Active Active Operators KPN W&O Wholesale BV Operators● Buy in capacity on Reggefiber‟s passive fiber network ODF Agreement● Deliver wholesale fiber services ODF Access to service providers EUR 12 – 17.50 [*] Passive Operator Operator Reggefiber Operator BV● Builds, owns and operates the passive fiber network● Delivers open access to active Management Agreement Indicative monthly price operators ranges per active NEMs connection 5 | 19 [*] excludes one-off fees, line rentals etc.
  6. 6. Reggefiber’s headoffice marks start of Fiber roll out in NL 6 | 19
  7. 7. Steady growth of FttH Homes Passed (HP) and Homes Activated (HA) 7 | 19
  8. 8. Reggefiber is active in more than 55 Municipalities 8 | 19
  9. 9. Reggefiber: an innovative company 9 | 19
  10. 10. OPTA policy rules provide long-term regulatory certaintyfor Reggefiber and its customers● Competition Authority (Nma) and Dutch telecoms regulatory body (OPTA) worked together to approve JV Reggefiber● Reggefiber to operate at arm´s length from its shareholders● OPTA has published policy rules for tariff regulation and unbundled fiber access (= ODF access) to provide long-term regulatory certainty for all parties involved and ensure guaranteed, non-discriminatory access for third parties to Reggefiber‟s passive network● Rental rates per active fiber pair, vary per project area as a function of average CAPEX per Home Connected● OPTA has imposed a cap on ODF tariffs: • Tariff cap indexed with CPI • ODF tariff caps validated on 3-year intervals by OPTA by comparing actual IRR against benchmark all-risk WACC that includes fiber specific and asymmetrical regulatory risk premiums 10 | 19
  11. 11. Business model – Revenues● Monthly rentals paid by Active Operators to Reggefiber: • Fixed tariffs per Home Activated (fiber pair rental) dependent on capex : €12 – 17.50 • Fixed tariffs for Area PoP (*) co-location (€500) and Area PoP – City Pop city-ring (€600)● One-off fees: • Area PoP connection: €3,000 • Fiber pair connection: €100● A discount applies depending on the total number of Homes Activated / customers served in a certain area● Rentals indexed anually with CPI (*) one Area PoP can serve maximum 2,500 Homes Passed, Rates are per EOY 2008 11 | 19
  12. 12. Business model - Capex, OpexCapital expenditure (capex)● CAPEX per Home Connected typically around €1,000, consisting of labor (civil works, engineering: > 80%) and materials: < 20%● CAPEX levels vary depending on local circumstances (in particular urban density, rivers, canals, railroads)● Capex reduces with 10% every yearOperational expenses (opex)● Main items and model assumptions: • General costs: 3% of gross rental revenues • Activation costs: €20,- one-off for activating one fiber pair • O & M fee: €12,- per year per Home Passed (payable by NEM subsidiaries to Reggefiber Operator B.V. pursuant to Management Agreement) 12 | 19
  13. 13. Typical cash flow profile of a FttH project 13 | 19
  14. 14. Secured credit facilities (€285m) from EIB and commercial banks for 33local Network Companies (NEM) in ‘ring fence’ Reggefiber Reggeborgh KPN B.V. KPN B.V. Reggefiber Reggefiber GroupB.V. Group B.V. Reggefiber Reggefiber Reggefiber Reggefiber ttH B.V. ttH B.V. Operator B.V. Reggefiber Wholesale B.V. Wholesale B.V. Ring fence KPN B.V. (G)NEM NEM NEM subsidiaries 33 FttH projects other FttH projects KPN B.V. 14 | 19
  15. 15. FinancingKey characteristics• Maturity c. 10 years• €285mn 50%/50%: EIB and five commercial banks• Draw test: Total debt / Homes Activated < “fixed amount”• Net Debt/EBITDA covenant• After construction; DSCR-covenant and cash sweep• Security on network, receivables, bankaccounts, shares, etc• Minimum interest hedging requirement• Significant information requirements 15 | 19
  16. 16. Important aspects on how to get approval• Projects must meet the following criteria (*): • Meet at least one of the EIB‟s objectives (see website EIB) • Be technically sound • Be financially viable • Show an acceptable economic return • Comply with environmental protection and procurement regulation• “…be a well managed company… (*) EIB website 16 | 19
  17. 17. Reggefiber …doing the right thing, the right way…From press release November 3, 2010● "This 10-year loan is crucial for Reggefiber to reach its ambitions and we greatly appreciate the support of the European Investment Bank for half of the funding." said Jan van Rooijen, Reggefiber Financial Director. "Involvement of the European Investment Bank in close cooperation with ABN AMRO, BNP Paribas, Friesland Bank, ING and RBS enhances the scale of Fiber-to-the-home we can provide in the Netherlands”, he added● “Providing consumers and businesses with some of the fastest broadband speeds in the world sets the pace for European economic growth based on digital innovation. The open model will encourage greater competition in the Dutch broadband market. It is also an excellent example of how the EIB and the Commission can work effectively together to stimulate private sector investment in areas of strategic importance for Europes future.“ highlighted Neelie Kroes, European Commission Vice President responsible for the Digital Agenda …Reggefiber considers the EIB loan as an EU-endorsement for Reggefiber’s ambitions and a compliment for the way the company is managed… 17 | 19
  18. 18. People just love FttH Information session Reggefiber June 17th 2008 in Eindhoven (while Dutch team was playing for the European football championship) 18 | 19
  19. 19. Thank you for your attention… 19 | 19

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