LONDON, UK: HICL Infrastructure Plc has acquired its first fibre broadband investment through the acquisition of a 55% shareholding in ADTIM SAS in France from DIF Capital Partners from its DIF CIF I fund.
Following completion, ADTIM will represent approximately 2% of HICL’s portfolio, by value. This is HICL’s first fibre broadband investment and the third fibre broadband investment made by InfraRed-managed funds in Europe.
ADTIM is an independent wholesale fibre network providing low density rural areas in the South of France with 18,300km of critical fibre-to-the-home (“FTTH”) broadband infrastructure. Procured under France’s 2012 Ultra-Fast Broadband Plan, ADTIM is the sole wholesale provider of this subsidised rural network, with pricing regulated by ARCEP, the French telecom regulator.
This essential infrastructure benefits from long-term predictable cash flows and high barriers to entry, placing the asset at the lower end of the infrastructure risk spectrum. The investment is accretive to key portfolio metrics.
ADTIM has been awarded two concession contracts by the local authority, under the French Public Initiative Networks (“PIN”) scheme, to operate two infrastructure networks providing broadband access to telecom operators serving the residential and business retail markets in the Drôme and Ardèche area:
· PIN 1: 2,300km of fibre under a 25-year concession awarded in 2008, which has been fully operational since 2011; and
· PIN 2: 16,000km of fibre in 640 municipalities, under a 19-year concession awarded in 2016 to deploy and operate c. 350k FTTH lines by 2025. This PIN remains in deployment phase (‘roll-out’) with delivery obligations to remain with the local authority.
ADTIM’s network is run by one of the largest wholesale operators in France, Axione, a subsidiary of Bouygues Energies & Services (“BYES”), part of the Bouygues SA Group. Axione manages c. 20% of all FTTH PIN areas in France and operates across the full fibre value chain from design to roll-out to operations, in both France and the UK.
ADTIM earns wholesale revenues generated from the sale of its broadband and network services to Internet Service Providers such as Free, Bouygues Telecom, Orange and SFR under an ARCEP-regulated tariff. Operating costs are largely contracted under long-term contracts with Axione.
As indicated above, a portion of the network is subject to further roll-out, scheduled for completion in 2025. The local authority bears the full risk of construction and delivery of the lines under the concession contract.
InfraRed was supported on the acquisition of ADTIM by Olivier-Marie Racine, from InfraRed’s network of senior advisers. Olivier-Marie was the CEO of BYES until 2020, where he oversaw the development and operation of the Axione business. Olivier-Marie will sit alongside members of InfraRed’s asset management team in representing HICL’s interests on the board of ADTIM.
ADTIM is the third fibre broadband investment made by InfraRed-managed funds in Europe since 2020. InfraRed has been specifically exploring the French fibre market for HICL for the past two years, owing to its maturity, regulated framework and concession-based delivery model, positioning the sector at the lower end of the infrastructure risk spectrum.
Completion of the transaction is expected in Q3 2022 following customary third-party consents. The investment will be funded from HICL’s existing credit facilities.
Edward Hunt, Head of Core Income Funds at InfraRed said: “InfraRed is delighted to have secured HICL’s first digital communications investment. ADTIM fits with HICL’s vision by connecting underserved communities with fibre broadband; linking people to employment, education and each other. Providing essential public services, with long-term, predictable revenues generated under a regulated tariff, ADTIM is a prime example of core infrastructure of the modern economy.”