HICL Infrastructure has invested in fibre broadband for the first time, buying a 55% shareholding in ADTIM SAS in France from DIF Capital Partners. Following completion, ADTIM will represent approximately 2% of HICL’s portfolio, by value.
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.
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, 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, 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.
Completion of the transaction is expected in the third quarter of 2022 following customary third-party consents. The investment will be funded from HICL’s existing credit facilities.