plenary session financing ftth networks day 1 jan davids
DESCRIPTION
FTTH Conference Milan 2011 Day 1 Pleanary Session Financing FTTH Networks Jan Davids REFFEFIBER NETHERLANDSTRANSCRIPT
Directeur Corporate en Business Development
Jan Davids
15 september 2010
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Financing FttH NetworksReggefiber
FttH Council Europe
Conference
Milan 2011
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The Netherlands
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
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)
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Reggefiber(*) and its shareholders
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‟.
Reggefiber
Group B.V.
Reggefiber
Reggefiber
Group B.V.
KPN B.V.
(41%)
Reggeborgh
(59%)
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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 sector
Strategic 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
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Consumer broadband
subscription packages
EUR 45– 110 (triple play)
Wholesale broadband access
EUR 25 – 42 (triple play)
ODF Access
EUR 12 – 17.50 [*]
Indicative monthly price
ranges per active
connection
● Deliver services to consumers● Communicate to consumers
● Buy in capacity on Reggefiber‟spassive fiber network
● Deliver wholesale fiber services to service providers
● Builds, owns and operates the passive fiber network
● Delivers open access to active operators
[*] excludes one-off fees, line rentals etc.
ReggefiberWholesale BV
ReggefiberOperator BV
NEMs
KPN W&O 3rd party ActiveOperators
ODF Agreement
Management Agreement
SP SPSP KPN SP SP
Wholesale
agreements
CONSUMERS
Passive Operator
Active Operators
Service Providers
Business model – parties involved and value chain
Passive Operator
Active Operators
Service Providers
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Reggefiber’s headoffice marks start of Fiber roll out in NL
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Steady growth of FttH Homes Passed (HP) and Homes Activated (HA)
8 | 19Reggefiber is active in more than 55 Municipalities
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Reggefiber: an innovative company
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● 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
OPTA policy rules provide long-term regulatory certainty
for Reggefiber and its customers
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● 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
Business model – Revenues
(*) one Area PoP can serve maximum 2,500 Homes Passed,
Rates are per EOY 2008
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Capital 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 year
Operational 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)
Business model - Capex, Opex
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Typical cash flow profile of a FttH project
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(G)NEM
subsidiaries
Reggefiber
ttH B.V.
Reggefiber
Group B.V.
KPN B.V.
ReggefiberWholesale
B.V.
Reggefiber
NEM
33 FttH projects
Reggefiber
ttH B.V.
Reggefiber
Group B.V.
KPN B.V.
Reggefiber
Wholesale B.V.
Reggeborgh
KPN B.V.
KPN B.V.
Secured credit facilities (€285m) from EIB and commercial banks for 33
local Network Companies (NEM) in ‘ring fence’
Ring fence
Reggefiber
Operator B.V.
NEM
other FttH projects
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Financing
Key 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
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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
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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 Europe's 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…
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People just love FttH
Information session Reggefiber June 17th 2008 in Eindhoven
(while Dutch team was playing for the European football championship)
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Thank you for your attention…