FORESIGHT INHERITANCE TAX SOLUTION - Fibre Broadband - May 2021 - Foresight Group
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
FORESIGHT INHERITANCE TAX SOLUTION Fibre Broadband May 2021
What is Fibre Broadband?
The UK Government has set a target Full Fibre-to-the-Premises (FTTP) is a broadband
for 85% national gigabit-capable connection provided using fibre-optic cables that run
directly into the premises, such as homes and offices.
broadband coverage by 2025,
FTTP enables connection speeds of circa 1,000Mbit/s or
expected to be predominantly 1GB/s, this is significantly faster than the connection most
achieved through the roll out of Full homes have today which are fibre-to-the-cabinet (FTTC)
connections. FTTC connections typically provide
Fibre-to-the-Premises ("FTTP") broadband speeds of 35-80Mbit/s. FTTP connections
networks across the country. provide greater upload speeds than FTTC connections
which is important for use cases like video conferencing,
gaming and cloud computing.
The UK has the fifth largest number of
FTTP connections are less prone to operating faults than
broadband and mobile subscriptions FTTC connections and are less likely to experience slower
in the OECD but has the third lowest connection speeds when there are a large number of users
on the network.
proportion of FTTP connections. Only
18% of homes in the UK have access
to full-fibre broadband.
What is driving the need for faster broadband?
Against a backdrop of rising data usage highlighted by
Ofcom, the HM Treasury’s National Infrastructure Review
emphasised that better digital connectivity creates new
opportunities and a higher standard of living for UK
consumers and businesses.
Exponential rises in data usage:
Data usage by households has increased rapidly from
240GB per month per connection in 2018 to 315GB per
month per connection in 2019 which is increasing the
demand for faster connection speeds to download and
store increasingly large amounts of data.
Delivery of economic, social and well-being benefits:
Reliable and efficient digital infrastructure is vital to
ensure businesses can operate effectively in an
environment which requires a greater online presence,
students can access vital resources required to continue
to learn and people can connect with each other virtually.
Connecting rural communities:
Better connectivity in for people living outside of major
cities and in rural areas encourages job creation and
innovation across the UK, helping rural businesses to
grow and attract better talent while also reducing the
need for travel.
Source: OFCOM Connected Nations UK Report, 2020Facilitating the fibre roll-out in the UK
Fibre roll-out in the UK
• Ofcom has introduced a number of measures to encourage new market entrants and
further competition into the Fibre sector with the aim of delivering UK Government’s
target of national gigbit-capable coverage.
• One of the key measures implemented includes providing Altnets with access to BT
Openreach’s existing physical infrastructure at regulated prices to reduce the costs of
building FTTP networks.
• Large providers of broadband internet such as BT Openreach and Virgin Media, who
have already built FTTP or similar high-speed networks in the UK, have announced plans
to extend their FTTP networks to cover large parts of the UK.
• BT Openreach is targeting to build a FTTP network which passes 25 million premises by
December 2026.
• Most of the roll-out of FTTP networks by larger players have focused on major cities to
date.
• This creates an opportunity for alternative networks (Altnets) to build small to medium
FTTP networks in locations which are not being targeted by BT Openreach or Virgin
Media in the short term.
• Altnets typically raise capital to fund the build of their FTTP networks from private
equity and infrastructure investors as a number of the characteristics of the FTTP
businesses are comparable to traditional infrastructure investments. In addition to
private funding, Government subsidies are offered to Altnets who build FTTP networks
in hard-to-reach rural areas.
• The Foresight ITS has provided funding to Lightning Fibre, an Altnet which is building a
FTTP network in East Sussex.
How does Foresight source assets? Key risks
Foresight sources fibre broadband investment • Risk of slower build out than anticipated due to
opportunities from its network of contacts with inability to recruit sufficient staff or obtain local
advisors and industry experts within the Infrastructure authority permissions
sector. • Risk of competition from other broadband providers
Foresight’s significant track record of financing the in certain locations
construction of infrastructure assets and operating • Risk of technical obsolescence: although the fibre
these assets when they are built ensures that Foresight broadband itself will last many decades, there are
remains an attractive partner for Atnets looking for hardware and software upgrades over time
funding.Why Foresight is investing in Fibre Broadband
The returns are underpinned by the ownership of the physical infrastructure
which is the FTTP network.
The network has a long asset life of 30 years plus (the existing copper network
is a century old) and once built out, has the ability to generate stable cashflows.
What protection exists for investors
COMPETITOR
ENTRY Investments are made into businesses looking to take advantage of being the first
mover in target locations. Once the business has built a network, it is less attractive
for competing Altnets to overbuild an existing network.
ESTABLISHED The technology is well established and relatively easy to install. As most of the
TECHNOLOGY infrastructure is laid underground, it requires little maintenance. Due diligence is
performed on the equipment proposed for the network and the construction plan
Fibre cables installed have sufficient redundancy to handle increased data volumes
FLEXIBILITY OF
and a greater number of customers on the network. In the longer term, additional
NETWORK
CAPACITY capacity can be added to the network by upgrading electrical equipment located at
street-level and in homes reducing the need to dig up streets again.
Substantial demand exists to acquire FTTP networks in the UK. Once a proportion of
INVESTOR the network is built, it can be sold to other investors or larger Altnets, providing an
DEMAND FOR
exit opportunity for the ITS.
BROADBAND
ASSETS
How returns are achieved
Foresight provides the funding required to
construct the FTTP network and connect customers.
Funding is usually provid ed in the form of
equity and shareholder loans.
Customers typically sign up for 12-24 month fibre
Contact us
broadband contracts and pay a monthly
subscription fee. The contract prices are generally +44 (0)203 667 8199
on a par with slower FTTC services ensuring an sales@foresightgroup.eu
attractive product that can be sold directly to
Foresight Group LLP, The Shard,
businesses and homes or through a retail Internet 32 London Bridge Street,
Service Provider. Operating costs are low and stable London SE1 9SG
allowing most surplus cashflow to be available for
foresightgroup.eu
distribution to investors once the network is built.
This document has been approved as a financial
The und erlying capital return and interest promotion for the purposes of section 21 of the
is commensurate with returns generated through Financial Services and Markets Act 2000 (FSMA) by
other similar infrastructure investments and Foresight Group LLP, which is authorized and
regulated by the Financial Conduct Authority (FCA)
provid es a good risk-weighted return.
(ref 198020). Foresight’s registered office is at The
Shard, 32 London Bridge Street, London SE1 9SG.You can also read
