Berlin, Frankfort The billion dollar market for digital infrastructure continues to grow. The Hamburg investor Digital Transformation Capital Partner, DTCP for short, has now collected one billion euros for projects in Western Europe. “This sum is to be increased significantly over the next twelve months,” says DTCP co-founder and company boss Vincente Vento to the Handelsblatt.
Vento expects strong growth in the market for digital infrastructure in Europe – and sees enormous potential. He considers equity investments of 200 billion euros to be realistic over the next ten years.
Institutional investors such as Allianz, Blackrock, the former Aberdeen Asset Management, a sovereign wealth fund from the Middle East and a German pension insurance fund were among the new financiers for the “Digital Infrastructure Vehicle II” fund. Launched in June last year, the fund will focus on cell towers, fiber optic lines and data centers.
Deutsche Telekom, for example, had already invested beforehand. The investment sum for the individual addresses ranges between 150 and 200 million euros. The aim would be eight to ten deals.
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In the Netherlands, investments have already been made in radio towers and a fiber optic project. A data center project in Germany will be added shortly.
Target return of up to 15 percent
Vento names a net target return of ten to 15 percent for investors, with a term of ten to twelve years.
“We build up the investments over three to four years,” says Vento. At the end of that time, all systems were then sold again.
Some of DTCP’s competitors invest in other infrastructure projects, such as highways, renewable energies or oil pipelines. The better known names included KKR from the USA, the Swedish EQT and the French Antin Infrastructure Partners.
The DCTP, which manages 2.3 billion euros, thus joins the ranks of well-known investors. They all want to put more than ten billion euros into the grid every year. Partners are usually network operators such as the German fiber optics, which now belongs to the EQT Group and wants to invest seven billion euros.
Deutsche Telekom plays a key role
Deutsche Telekom is the largest investor in the market. She wants to invest three billion euros a year alone. In addition, it cooperates with regional provider EweTel (investment volume: two billion euros) and the IFM Global Infrastructure Fund (six billion euros).
Overall, private investors have announced that they intend to expand the fiber optic network by 2025 with around 50 billion euros. These also include smaller companies such as DNSNet or One Fiber, but also energy suppliers such as Eon and Vattenfall.
>> Read also: Eon is looking for an investor for fiber optic expansion
In view of the rising construction and raw material prices, there had been discussions in the past few weeks as to whether companies might put their investment plans on hold.
The Federal Association of Broadband Communication therefore welcomes the commitment of the DCTP. “The announcement is a clear sign that the private sector wants to continue investing,” said Sven Knapp, member of the management board. “The federal government should implement the gigabit strategy trust in the market and less in subsidy programs.”
With the gigabit strategy, Federal Digital Minister Volker Wissing (FDP) wants to ensure that half of all households are connected to the fiber optic network by 2025. By 2030, everyone should be able to use the network.
From 2023, the Minister of Transport wants to provide targeted funding where fiber optic connections have not previously been possible.
(Photo: dpa)
To this end, the federal government discussed an efficient funding program in months of wrangling with the federal states and the telecommunications industry. The state wants to use it to promote wherever it is not worthwhile for the economy.
The previous funding is considered too complicated and inhibiting. In the future, an analysis should help in advance to identify economic areas in Germany and thus concentrate tax money on the unprofitable regions and connect households there as well. Less than 20 percent of households are currently connected to the fiber optic network.
The new funding program is scheduled to start on January 1, 2023, but still has to be created and coordinated within the federal government. Only then does the government want to discuss it with the industry associations.
Dead spots and 5G are a challenge
In addition to the fiber optic networks, the state also wants to ensure a seamless mobile network of the new 5G generation with funding and its own company. The major network operators have transferred their radio towers to subsidiaries, such as Deutsche Telekom to Deutsche Funkturm or Vodafone to Vantage Towers. Telefónica even sold them.
The energy company Eon is also active and wants to build several hundred radio masts with its subsidiary TowerCo together with the radio mast operator Novec. Eon wants to use the roofs of its own buildings for this purpose.
Up to seven billion euros are to flow into data hubs.
(Photo: dpa)
The area of data centers has been less observed so far. According to the Internet association Eco, data capacities in Germany grew by 30 percent from 2016 to 2021 and are therefore of interest to investors.
“Data centers are guarantors for the digital performance, sustainability and sovereignty of Germany as a business and digital location,” emphasizes Eco Managing Director Alexander Rabe. The announced investments would be around seven billion euros.
More: Why digitization is also important for climate protection