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Digital 9 Infrastructure – Intention to float

Digital 9 Infrastructure today announced its intention to launch an IPO on the specialist fund segment of the main market of the LSE, by way of an initial placing and offer for subscription for a target issue of 400m ordinary shares at an initial issue price of £1.00 per ordinary share. The IPO Prospectus is expected to be published in March 2021.

‘Digital 9 Infrastructure will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet’

Digital 9 Infrastructure will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The portfolio will comprise future-proofed, non-legacy, scalable platforms and technologies including (but not limited to) subsea fibre, data centres, terrestrial fibre, tower infrastructure and small cell networks (including 5G). The Company will focus, primarily, on digital infrastructure investments which are operational and with an existing customer base.

The company’s manager Triple Point Investment Management (Triple Point), an experienced manager with over £1.8bn of private, institutional, and public capital and has extensive experience in asset and project finance, portfolio management and structured investments. Triple Point will benefit from a panel of digital infrastructure industry experts, with deep knowledge, relationships and involvement in a combined US$250 billion of digital infrastructure transactions.

Key investment highlights

The investment opportunity is summarised as follows:

  • “Pure play exposure to digital infrastructure, the critical assets for our connected world.
  • Investing in businesses/assets with medium to long-term contracted revenues: subsea fibre, data centres, terrestrial fibre, tower infrastructure and small cell networks (including 5G).
  • Compelling return profile with the Company targeting 10 per cent p.a. net total accounting return, including an initial 6 per cent dividend yield per annum (by reference to the issue price on IPO) for the first financial year (significantly covered at IPO) and progressive thereafter1.
  • Up to c.£160m of IPO proceeds expected to be invested on or shortly after IPO into Aqua Comms, a platform owning and operating some 20,000km of the most reliable and resilient trans-Atlantic sub-sea fibre systems – the very backbone of the internet.
  • Aqua Comms has a strong customer base, with a broad range of global content providers (particularly the FAANGs – Facebook, Amazon, Apple, Netflix, Google and Microsoft) and telecom service providers, providing long-term contracted revenues. Aqua Comms’ broad base of customer relationships and essential services is expected to provide the Company and the Investment Manager with significant insight and access into some of the biggest purchasers and users of digital infrastructure. The Investment Manager believes this will provide opportunities to better evaluate investment opportunities and to support revenue growth on acquired assets.
  • Significant and proprietary pipeline assembled by the Investment Manager, and supplemented with a right of first refusal from Aqua Ventures Limited (“AVL”), a third party developer registered in Jersey (which developed Aqua Comms), giving exclusive access to AVL’s development asset portfolio. The total pipeline has over US$3 billion in identified proprietary opportunities, of which US$1 billion is expected to be ready to invest in over the next 12 months.
  • ESG is central to the DGI9 investment approach and to its Investment Manager, Triple Point – providing digital infrastructure integrated with green and cleaner power in line with the United Nations Sustainable Development Goal 9: “Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation”.
  • Attractive and simple investment management fee, no performance or any other ongoing fees.
  • Highly experienced team with deep-rooted relationships in the digital infrastructure sector.
  • Diverse Board comprising five independent Non-Executive Directors, with a broad range of skills and experience covering the digital and telecoms sectors, infrastructure and the listed investment company sector, chaired by Jack Waters (ex-COO of Zayo Group Holdings Inc).
  • The Company expects to publish a prospectus in March 2021 and complete the IPO shortly afterwards.”

Market opportunity – ‘The amount of data produced and consumed is expected to quadruple by 2025’

“Digital infrastructure refers to the critical infrastructure required for the internet to operate and, essentially, refers to everything from fibre networks that connect continents, businesses and homes, to the data centres that organisations use to house their critical networks of computer and storage resources, and to the towers and small cells that carry data traffic wirelessly to the end-user.

Any business that is online, including some of the largest and most successful global companies, increasingly requires the internet and data usage and transfer to function.

The drivers of digital infrastructure are growing exponentially:

  • Since 2010, the number of internet users worldwide has doubled while global internet traffic has grown 12-fold, equivalent to growth of around 30 per cent. per year;
  • Global internet traffic is expected to double by 2022;
  • The amount of data produced and consumed is expected to quadruple by 2025;
  • The number of mobile internet users is projected to increase from 3.8 billion in 2019 to 5bn by 2025
  • Demand for terrestrial and subsea bandwidth is growing so quickly that by 2026, 4 petabits of new capacity will need to be installed – 25% of total demand.”

Thor Johnsen, Head of Digital Infrastructure at Triple Point, said: “The demands on internet infrastructure are rising exponentially, as more of the world goes online, using more devices, with greater processing power. The world’s digitally connected economies depend on an ecosystem of subsea connections, data centres, wireless towers and terrestrial fibre. Existing infrastructure cannot cope with the expected demand.

The DGI9 initial assets comprise over 20,000 km of operational, best-in-class subsea fibre connections in the transatlantic corridor, the world’s most important subsea market – this is the true backbone of the internet. Revenue from these assets is backed by long-term contracts with global tech counterparties and household name telecoms businesses. Complementing the initial assets, our near-term acquisition pipeline includes data centres, terrestrial fibre and wireless infrastructure needed to plug the gaps in forecast demand and existing supply, bringing faster and more reliable connections to more people.”

Readers interested in the full briefing can access the intention to float RNS release by clicking here.

Digital 9 Infrastructure – Intention to float

[The announcement follows on from Cordiant Digital’s planned IPO announcement last week. This is a nascent area of the listed infrastructure space that should grow in prominence, particularly in light of the pandemic’s impact on digitalisation. Compared to Cordiant, Digital 9 plans to offer a higher target return and much higher yield. We wish it all the best.]

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