Michael Armitage - Broadway Partners: Hammers & Toolboxes

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Michael Armitage's presentation to the INCA Rural Broadband Seminar, Reaching the Final 10% on 20/11/13 in London

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Michael Armitage - Broadway Partners: Hammers & Toolboxes

  1. 1. Hammers and Toolboxes Creating Choice for Government…. and People Broadway Partners 20th November 2013 1
  2. 2. Complexity… and Externality Source: Arthur D Little 20th November 2013 2
  3. 3. ‘Thinking Out-of-the-(Tool)Box’! • Gap-funding has got BT going… but will not deliver the ‘final 10%’ at acceptable VFM or quality • A different approach required… 20th November 2013 3
  4. 4. What’s Possible? • The numbers are straightforward: £250m BDUK + £250m Council match + £500m Investor match + £2,500m debt, 2.5:1 leverage = £3.5bn a/v to invest • Regulatory perspective: • Assuming 12% allowed return… if Kd = 5%, allowed equity return = 33% • Market perspective: • • • £3,000 cost/connected home, £150 p.a. yields 2% to equity £2,000 cost/connected home, £150 p.a. yields 10% to equity £1,000 cost/connected home, £150 p.a. yields 32% to equity • i.e. with scale, blended returns can compensate for uneconomic returns 20th November 2013 4
  5. 5. Conclusion • Councils and Government can fix the ‘final 10%’! • All the tools are available and proven – co-investment, project finance SPVs, local authorities as procurers – it’s only the combination that is new • Benefits are substantial: • • • • • • • A real choice, not a re-tread Superior technology solution – FTTH, with Open Access An investment, not a grant – no State aid issues under MEIP Service diversity – think 100% digital inclusion More efficient delivery of public services Stimulus to inward investment Demonstrably better VFM with public funds • In the vulgarism of the day, ‘what’s not to like?’ 20th November 2013 5
  6. 6. Conclusion Thank you! 20th November 2013 6
  7. 7. Conclusion Thank you! 20th November 2013 6

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