CMS Bureau Francis Lefebvre, in partnership with FIRIP, organised a conference, held on 16 May, which brought together an informed audience to discuss the situation and future challenges for the private funding of high-speed Public Initiative Networks (PINs).
The appetite of private investors (CDC, infrastructure funds, etc.) and the banking sector for optical fibre digital development projects now seems to be confirmed. It comes in response to the issues covered by the French national broadband scheme (Plan France Très Haut Débit), with 50% of the French population covered by 30 Mbit/sec broadband by end of March 2017 and plans to achieve FTTH coverage for 80% of the population by 2022.
The high-speed broadband scheme was also hailed as an unprecedented example of a powerful, high-performance structural project conducted in a decentralised manner and in which local authorities have embraced their role ambitiously and cohesively. Today, the authorities have embarked on a race against time to select the designer, builder and operator of their future network (14 PIN project-awarding procedures are currently in progress), requiring operators to lay out their financial arrangements within ever shorter timeframes.
However, experts at the conference pointed out that certain risks need to be analysed with regard to PIN funding.
Other than the construction and technology risk, there is a huge commercial risk that weighs heavily on discussions between financing organisations and PIN public service operators. Price, product mix (passive rental, active rental or co-investment) and penetration rate are all subject to close scrutiny. The announcement from INSEE on the upcoming creation of a price index in the telecoms sector has been favourably received by stakeholders in the sector, as it will define the evolution of wholesale prices offered by PIN public service operators throughout the project lifecycle.
“This commercial risk should not be overstated with regard to the short to medium term, even for PIN operators who are not integrated operators, because of the national agreements established between stakeholders and an increase in competition between internet access providers“, emphasises Pierre-Michel Attali, director of the digital territories division of Idate and VP of FIRIP.
As for the construction risk, the shortage of highly sought-after human resources may be seen as an obstacle, or indeed a significant threat, likely to lead to delays in achieving the deployment objectives. It should also be noted that there are 14 million connectors to be equipped with fibre in the PIN zones by 2022, with another 5 million remaining after that, and the related financing to be found.
There is a need to educate the authorities heading PIN projects.
“Although the authorities’ view is now evolving, they have not yet sufficiently taken on-board the fact that a project funded by lenders may be more robust that one with corporate financing”, claimed one of the operators at the conference, in favour of private investors.
Making it necessary to complete the financing documentation long before projects are awarded is not always appropriate given that the procedures for the awarding of public service contracts are often lengthy and there are likely to be changes to the authorities’ specifications.
In any event, everyone agreed that, even though subsidy requirements may be revised downwards (see the conclusions from the 2017 Observatory on PINs), the financial involvement of the local authorities remains decisive in guaranteeing the equalisation and equity of high-speed broadband development across France. “With this private-public model, stakeholders in the telecoms sector are forging a particularly effective public service financing system, which could be reproduced in other sectors”, says a delighted Eric Jammaron, Axione CEO.
One final concern raised by FIRIP:
“SMEs and micro-businesses that are subcontractors of public service operators are facing strong prospects for development, requiring financing, but are unable to provide firm commitments for the long term in the form of a book of confirmed orders”, explains Etienne Dugas, Chairman of FIRIP.
In response, the federation has announced that it is to set up a sector fund, similar to those set up in other sectors such as aerospace, to fund the requirements of these industrial players. The €15 million fund will be managed by Innovafonds. It will initially help finance a dozen or so projects and should be set up by the end of the year. A call for contributions has been issued.
The speakers were Etienne Dugas, chairman of FIRIP; Pierre-Michel Attali, director of the digital territories division of Idate and VP of FIRIP; Thierry Bodard, managing director, NGE; David El Fassy, CEO, Altitude Infrastructure; Laurent Chabot, joint manager of infrastructure financing at Société Générale; Eric Jammaron, Axione CEO; Gaël Serandour, manager of the digital infrastructures department, Caisse des dépôts et consignations; François Tenailleau, partner and lawyer specialised in public and infrastructure law; Audrey Maurel, lawyer specialised in public law and electronic communications law, and Sadri Desenne-Djoudi, lawyer specialised in banking and financial law and project financing, all three from CMS Bureau Francis Lefebvre.
The sellers were advised by Adven Legal (Matthieu Hanser, Mathieu Marcantoni and Clément Haberbush) regarding legal matters and by PAX Corporate Finance (Anthony Ginieis and Sébastieu Leleu) for financial aspects.