Capacity Agreements In The Telecommunication Sector
Government pressure on CAPEX spending on broadband deployment (including gigabit connectivity) and ensuring national 5G leadership are a new impetus for change. With the pandemic dependence on internet connectivity for everything – from work to healthcare and shopping to research – COVID-19 has only made this pressure more relevant, while further limiting investment costs for new or extended networks, giving operators capacity levels and network resilience. As a result of the implementation of much of the digital transformation infrastructure, which we see across sectors and companies, traditional telecom network operators continue to face significant changes in markets, technologies, consumer demands and value chains. Another trend that is being seen is the rapid growth of pure fiber optic providers, also known as «old-fashioned ones,» increasingly powered by private equity. Recent examples are the investments and development of Community Fiber and CityFibre in the UK, as well as German fibre optics in Germany. In addition, open access fiber is developing as a model with the potential to limit double investment and increase economies of scale, while contributing to the government`s universal broadband goals. Gone are the days when national telecommunications markets were defined primarily by old incumbent telecommunications companies with a handful of mobile operators (MNOs). For some time now, new types of players have emerged, exploiting the opportunities offered by market liberalization, competitive regulatory frameworks and the relaxation of licensing systems. COVID-19 has proven to be an accelerator of a continuing trend towards greater digital, financial and economic inclusion, writes Alex Kazbegi, VEON. The main realization here is that the sector is changing radically, with new players entering the struggle and are more numerous. However, operators refuse to sit idly by and see the world around them change and end up trying to adapt.
Their future will depend on the success of such efforts. While operators were busy reinventing themselves as (largely unsuccessful) technology companies, the forces described above encouraged a large number of new players. These «new kids on the Block» take over the role of operators as infrastructure players, in particular the strengthening of Tower`s independent companies, which have taken over the tower assets of telecommunications companies and now achieve higher shareholder returns than telecommunications companies, according to a BCG report, as well as positive reactions from financial markets. According to FT, cellnex – a member of the ITU – a fast-growing European tower company – is currently experiencing a share price evolution comparable to big tech. Third, the changing financial landscape, marked by numerous stimulus packages (which have in fact never stopped since the Great Recession), is leading to the availability of more money for investment or credit and lower interest rates, which, especially given the considerable economic uncertainty, is generating a huge demand for assets that promise stable returns – the infrastructure layers of the telecommunications sector are falling back and filling well. This article only discusses the growing separation of the telecommunications sector into horizontal layers, each with its different investment needs, risks and returns, as well as its financing profiles – these are the transformations taking place behind the scenes, invisible to customers. This does not mean, however, that the sector is stagnating on the customer side.