Roland montagne


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FTTH Conference EUROPE 2012 - Workshop
Munich, Germany

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Roland montagne

  1. 1. Financing FTTH networksStudy for FTTH Council EuropeWorkshop: How to Start and Finance a FTTH BusinessMunich, 14th February 2012 Roland MONTAGNE Director Telecoms Business Unit, IDATE Dr. Raul KATZ President, Telecom Advisory Services LLC 1
  2. 2. Agenda► FTTH Projects selection► Theoretical framework for assessing financing models - Three drivers of FTTH project success - Project context drives financing model - Investment model drives financing model► Most Appropriate Financing Models► One recommendation: Pooled Financing 2
  3. 3. FTTH Projects selection 3
  4. 4. Taxonomy and sample of projects studied Formalization of taxonomy of financing approaches: two dimensions Geographic dimension: Urban, Suburban and Rural Financing strategies dimension: principal project sponsor and funding models Sampling matrix Geographic Mix Urban Sub-urban Rural Municipal Government Funding Financing Strategies PPP Operator-funded Operator-funded and public policy stimuli Source: IDATE and TAS LLC 4
  5. 5. Positioning of projects studied A dozen of project interviewed and positioned in the Matrix Projects selected in: Sweden, Finland, France, U.K, Germany, Spain, Switzerland, Latvia, Andorra, Lithuania and Netherlands Final Sampling matrix Geographic Mix Urban Sub-urban Rural Municipal • Project A • Project B • Project C • Project D Government Funding • French National Very High Speed Plan Financing Strategies • BB Delivery UK PPP • Project E • Project F Operator-funded • Project G • Project H • Project I • Project J Operator-funded and • Project K public policy stimuli Source: IDATE and TAS LLC 5
  6. 6. Theoretical framework for assessingfinancing models 6
  7. 7. Framework for assessing Financing models Three drivers of FTTH project success Project Context Investment Model Financing Model1. Competitive environment 1. Average revenue per 1. Sources of funds (existing players offering user (equity, public funds, broadband access) 2. Wholesale access debt)2. Competitive substitutes rates 2. Financial investors (VDSL, Docsis 3.0) 3. Wholesale/retail mix (institutional, banks,3. Industry structure 4. Deployment costs venture capitalists, (number of players, 5. Subscribers/homes angel investors, existing service-based passed governments) players) 3. Lending terms (limited4. Project sponsor or non recourse, rate (incumbent, municipality, and tenor, seniority, alternative service collateral, covenants) provider, etc.) Source: IDATE and TAS LLC 7
  8. 8. Project context drives financing model Competitive Project Environment Sponsor Are there Are providers offering Industry structure (numberany existing competitive substitutes of players, existing service Municipality Telecom Alternative service providers? (VDSL, Docsis 3.0) based players) incumbent provider • Retail ARPU of FTTH project • Borrowing capacity • Subscriber uptake • Credit rating • Wholesale ARPU of FTTH • Infrastructure renewal and project migration versus new • Retail/wholesale mix customer acquisition • Lending Rate • Loan maturity FINANCING MODEL • Lending Rate • Recourse or non-recourse • Covenants VARIABLES Source: IDATE and TAS LLC 8
  9. 9. Projects positioning in two dimensional context matrix FTTH Projects Contextual Matrix No competition Existing ADSL, Cable Existing VDSL and/or or 3G service Docsis 3.0 Municipality or local • Project D • Project F • Project B government • Project A • Project C • Project E Alternative operator • Project I • Project J • Project K Incumbent • Project G • Project H Low contextual Risk Medium Contextual Risk High Contextual Risk Source: IDATE and TAS LLC 9
  10. 10. Investment model drives financing modelAverage Revenue Wholesale Wholesale/Re Deployment Subscribers/Homes per User Access Rates tail Mix Costs Passed • Retail ARPU of FTTH project • Funding requirements • Subscriber uptake • Debt to equity ratio • Wholesale ARPU of FTTH project • Retail/wholesale mix • Lending Rate FINANCING MODEL • Debt servicing • Loan maturity • Drawing capacity • Covenants VARIABLES Source: IDATE and TAS LLC 10
  11. 11. Most Appropriate Financing Models Geographic Mix Urban Sub-urban Rural Municipal/Regio • Municipality as an •Public/private nal investor credit financing Public Private •Public service Partnerships delegationFinancingStrategies Operator-funded • Incumbent funded •Cost sharing • Joint venture model • Multi-fibre Operator-funded • Public funding program and public policy stimuli Source: IDATE and TAS LLC 11
  12. 12. One recommendation: Pooled Financing 12
  13. 13. Consider Pooled Financing Approaches for small FTTH Projects ► Pooled facility to finance multiple small projects, with several lenders taking their pro rata exposure to each of the projects ► Target size of each facility: US$ 20 million, sufficient to handle 5-6 small FTTH projects ► Projects would be majority-owned by public sector sponsors, although the private sector could have an ownership stake ► Facility will have the support from a public lender, which would provide credit enhancements, such as loan guarantees equal to 50% of the total amount ► The pooled facility will be ring fenced ► Projects could apply, through the pooled facility, to receive output-based aid from public funds ► Each project will be structured using a project finance approach ► Project sponsors will develop the FTTH projects with technical and operational assistance provided by government entities 13
  14. 14. Structure of Pooled Financing Facility Pooled Facility Long-Term Manager (e.g. EIB) LoanPublic Funds Pooled Financing •Credit Output- based Aid if Facility Debt service Enhancement needed payments Banks and Debt service Funding for Pension Funds repayments FTTH projects •FTTH project •FTTH project Technical •FTTH project Central •FTTH project Assistance FTTH project Government User fees FTTH services •FTTH project •FTTH project •FTTH project •FTTH project FTTH subscribers Source: IDATE and TAS LLC 14
  15. 15. Seven other recommendations will be revealedon Feb. 16th - Session 8 - 9:15 – 10:30 !!! 15
  16. 16. Thank you!Roland MONTAGNEIDATEDirector Telecoms Business 6 80 85 04 80 16