Out of the turbulence of 2020, one sector is emerging rejuvenated – telecoms. The new mega deals, especially when it comes to digital infrastructure, attest to it. This is the acceleration of a trend, rather than a new phenomenon. If anything, lockdowns imposed to handle the COVID-19 pandemic have only served to accelerate demand.
Out of the turbulence of 2020, one sector is emerging rejuvenated – telecoms. The new mega deals, especially when it comes to digital infrastructure, attest to it. This is the acceleration of a trend, rather than a new phenomenon. If anything, lockdowns imposed to handle the COVID-19 pandemic have only served to accelerate demand.
In the last couple of years interest by investors and governments in passive network infrastructure, in particular upgrading existing networks to optical fiber, has grown exponentially. New financial models are starting to emerge to meet the huge need for cash deployment for this attractive independent class of assets.
The attractiveness for markets and investors of digital infrastructure, especially fiber, is due to the certain inevitability that comes with it – the inevitability that it will drive the future. This means an advantage for first movers both in terms of revenue and exit, especially in situations where there is little or no competition with only one existing network to meet the increasing demand for connectivity.
Telecom's infrastructure has always been capex intensive and one of the major cash-draining features of telecom companies’ businesses. Some financing models like network sharing have been used in recent times to alleviate this burden on individual operators. However, this approach is no longer sufficient as there is now a surge in demand for an upgrade of telecom infrastructure, especially from copper to fiber, driven by increased data consumption and the requirements of 5G.