Roland montagne

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FTTH Conference EUROPE 2012 - WorkshopMunich, Germany

Text of Roland montagne

  • 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 Raul.katz@teleadvs.com1

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. FTTH Projects selection3 4. Taxonomy and sample of projects studiedFormalization of taxonomy of financing approaches: two dimensionsGeographic dimension: Urban, Suburban and RuralFinancing strategies dimension: principal project sponsor and funding modelsSampling matrixGeographic MixUrban Sub-urbanRural MunicipalGovernment FundingFinancingStrategiesPPPOperator-funded Operator-funded and public policy stimuli Source: IDATE and TAS LLC 4 5. Positioning of projects studiedA dozen of project interviewed and positioned in the MatrixProjects 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 PlanFinancingStrategies 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. Theoretical framework for assessingfinancing models6 7. Framework for assessing Financing models Three drivers of FTTH project success Project ContextInvestment ModelFinancing Model1. Competitive environment 1. Average revenue per1. Sources of funds (existing players offering user(equity, public funds, broadband access) 2. Wholesale accessdebt)2. Competitive substitutesrates2. Financial investors (VDSL, Docsis 3.0)3. Wholesale/retail mix(institutional, banks,3. Industry structure4. Deployment costsventure capitalists, (number of players, 5. Subscribers/homes angel investors, existing service-based passedgovernments) players)3. Lending terms (limited4. Project sponsoror non recourse, rate (incumbent, municipality,and tenor, seniority, alternative servicecollateral, covenants) provider, etc.)Source: IDATE and TAS LLC 7 8. Project context drives financing model CompetitiveProject EnvironmentSponsor Are thereAre providers offering Industry structure (numberany existing competitive substitutesof players, existing service MunicipalityTelecom 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 FTTHInfrastructure renewal and projectmigration versus new Retail/wholesale mix customer acquisition Lending Rate Loan maturityFINANCING MODELLending Rate Recourse or non-recourse Covenants VARIABLES Source: IDATE and TAS LLC 8 9. Projects positioning in two dimensional context matrix FTTH Projects Contextual Matrix No competitionExisting ADSL, Cable Existing VDSL and/or or 3G serviceDocsis 3.0Municipality 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 RiskSource: IDATE and TAS LLC 9 10. Investment model drives financing modelAverage RevenueWholesale Wholesale/ReDeploymentSubscribers/Homesper UserAccess Rates tail Mix CostsPassed Retail ARPU of FTTH project Funding requirements Subscriber uptake Debt to equity ratio Wholesale ARPU of FTTH project Retail/wholesale mix Lending RateFINANCING MODEL Debt servicing Loan maturity Drawing capacity CovenantsVARIABLES Source: IDATE and TAS LLC 10 11. Most Appropriate Financing Models Geographic MixUrbanSub-urbanRural Municipal/Regio Municipality as an Public/private nal investorcredit financingPublic PrivatePublic servicePartnerships delegationFinancingStrategiesOperator-funded Incumbent fundedCost sharing Joint venturemodel Multi-fibreOperator-funded Public funding program and publicpolicy stimuli Source: IDATE and TAS LLC11 12. One recommendation: Pooled Financing 12 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. Structure of Pooled Financing Facility Pooled Facility Long-TermManager (e.g. EIB)LoanPublic FundsPooled Financing Credit Output- based Aid if FacilityDebt service Enhancement needed payments Banks andDebt service Funding for Pension FundsrepaymentsFTTH projectsFTTH project FTTH projectTechnicalFTTH projectCentralFTTH project Assistance FTTH projectGovernment User feesFTTHservicesFTTH project FTTH projectFTTH projectFTTH projectFTTH subscribers Source: IDATE and TAS LLC 14 15. Seven other recommendations will be revealedon Feb. 16th - Session 8 - 9:15 10:30 !!! 15 16. Thank you!Roland MONTAGNEIDATEDirector Telecoms Business 6 80 85 04 8016