Break through the bottleneck for full fiber network rollouts: Fiber monetization
Fiber network is the foundation for 5G and F5G network as well as the premise to realize F5G vision “Fiber to everything”. Through fiber monetization and technology innovation, carrier operators are mostly on the way to speed up fiber network full coverage in the efficient way which helps building up the solid base for the 5th Generation Network launch.
In HAS 2020, Ms. Yuhong Wang, a senior financial expert from Huawei carrier network business group, shared her team recent insight: outside China, more and more carrier operators initiated the fiber monetization by spin-off of the fiber assets and attraction of external investors to cooperate on fiber wholesale business in order to break through the financial bottleneck for speeding up full fiber network rollouts and coverage and lead its business into the positive cycle for the better sales growth and operating cash flow improvement.
- Global Trend: Fiber investment has been increasingly attractive to capital market since 2017
The reason behind the trend from 2017 to now, is that FMC (fixed-mobile network convergence) strategy is fast executed by more and more carrier operators. From 2017, more and more capital shows interested in fiber business which facilitates the fiber monetization and helps speeding up the full fiber network rollouts and coverage.
We also observe that Fiber deal multiples EV/EBITDA is increasing fast in recent years from 12.3X in 2016 to 20.3X in 2018, higher than Tower deal multiples EV/EBITDA in 2018, which shows Fiber network (passive network) is becoming more premium assets.
- Fiber is “Gold”: Irreplaceable strategic resource with stable and good ROI
Firstly, Fiber network is the foundation for 5G、F5G networks. For 5G wireless network, fiber covers 99.9% links length and only last hundreds of meters is wireless coverage. Secondly, fiber spectrum capacity is huge and almost unlimited for future network upgrades. Thirdly, fiber network investment can benefit investors for more than 30 years.
In the latest 10 years (2008-2018), ICT industry average ROA (return on assets) was more than 6%,
The insurance industry average margin rate was 4%-6%. That is why we observe more and more insurance and infrastructure fund are interested in fiber business as long term investment facility with stable ROI.
- Case Study: French carrier’s quick fiber rollout by introducing external investors.
French carrier operator S made decision on spin-off of its existing fiber network (passive network) assets as well as its exclusive license for future rollouts of 4millions home pass fiber network, and established independent subsidiary S-FTTH for the above fiber assets wholesale business. After revaluation of S-FTTH assets, the above fiber assets were evaluated from booked value €0.5Billions to fair market price €3.6Billions. The parents company S decided to sell 49.99% shares of S-FTTH to external 3 insurance companies for €1.7billions. In the meanwhile, the subsidiary S-FTTH successfully obtained new credit facility for €1.8Billions for further fiber network rollouts preparation. The whole process is actually to relieve Carrier operator S financial pressure and helps it speed up the full fiber network coverage in French for both active and passive fiber networks.
- Across the Rift: Bridging the gap with an ecosystem and redefine the value of fiber networks
Fiber network is the important and basic infrastructure for the future network upgrades. Before, carrier operators faced the rift to make huge investment on fiber network rollouts independently. Now more and more stakeholders involve in fiber full connection network rollouts and coverage including government, external investors, suppliers, fiber wholesale providers and carrier operators together, which facilitates escalation of the full fiber network rollouts and coverage. The fiber assets value is redefined under the fiber network industrialization trend. It is the Right way to lead the positive business cycle for ICT industry development in the long run.