Strains on Capital Suggest Need for Effective Use of Assets in Deploying Fiber Networks

September 8, 2020 —The right time to engage in accessing funding is right now, fiber financers said during an ADTRAN webinar on Wednesday.

“The market is getting more congested and more difficult to enter,” said Peter Stokes, senior managing director at Macquarie Bank, and “it’s crucial to enter sooner rather than later. A lot of carriers realizing they need to build out networks as fast as possible.”

Stokes was joined by Bo White, vice president of global business development at Macquarie, and moderator Stuart Broome, to discuss how financers view the fiber investment landscape.

The three spoke on topics ranging from funding solutions, to the efficient utilization of capital, to why there is so little fiber infrastructure in the United States. The virtual conversation held on Wednesday was part of a week-long conference, which is held by ADTRAN annually, called ADTRAN Live.

Stokes began the conversation by detailing that investors focus on a range of different elements when deciding on whether or not to fund an infrastructure project, “more than you may expect.”

The two investors said that they aim to share the risks that come along with investing, rather than carry them all as an individual entity. “How much will it cost? Will the technology last or need to be updated? These are all questions to be taken into consideration,” White itemized.

Speaking on trends in the area, White said that a recent change in fiber investment trends is that carriers, which traditionally wanted to control all aspects of a network, now want to outsource aspects of ownership and work.

“Today, networks rely on a trusted vendor ecosystem,” said White, adding that this model is “a far more cost-effective way” to bring fiber to unserved parts of the country.

“There are so many demands on capital,” said Stokes, detailing the stress carriers can put on the capital community, “it is crucial that we be smarter with capital.”

A difficult question posed to the two Macquarie representatives by Broome, had to do with why there is so little fiber in the United States.

The investors said that part of the answer to this question may be that investors often believe investing in incumbent providers will guarantee to bring profit, while the utilization of new technology and ownership models makes banks more reluctant to invest.

“Incumbents have bankability” said Stokes. “They have the ability to organize permitting, access to contractors, and have immediate access to the technology.”