“Growth in the demand for data continues to increase exponentially”

Published on: 9 May 2023

APG, on behalf of its pension client ABP, recently signed to purchase euNetworks, a pan-European provider of fiber optic infrastructure. Instead of individuals, they have large corporations as clients. What is really the difference between fiber optics for the Googles of this world and fiber optics for consumers? And where is there still potential growth for the fiber optics market? We ask Laurens-Jan Sipma (Senior Portfolio Manager Infrastructure at APG).


Everyone has heard of terms like 4G and 5G, but when it comes to fiber optics for the business market, very different elements are important. For example, the assurance that the connection never, ever goes down. Recent years have seen a sharp growth in the demand for data. Various developments indicate that this demand will only increase further, Sipma expects. This also has consequences for the market for fiber optic connections.

euNetworks is active in the market for fiber optics to and from businesses. What characterizes this form of fiber optics?

“The kind of fiber optics that euNetworks offers is higher end. These are a type of high-speed fiber optic lines that connect large data centers in cities such as Amsterdam, Paris and Frankfurt, as well as cities in Scandinavia, southern and central Europe. These connections are used by multinationals, banks and ‘hyperscalers’ (large-scale providers of cloud services, among others). These big clients expect a certain level of service in terms of speed, reliability and security. euNetworks can guarantee that level of service because they manage their own high-quality network.”


Can households expect this kind of fiber connection in the future?

“The question is whether this is necessary. The connections we have as households are already quite stable and of high quality. Especially if you compare it to the cable and copper connections we had before. The availability and speed of fiber optics for households will continue to improve in the future, but the network that large companies need is of a different level. They sometimes need as much as triple backhaul. euNetworks, for example, provides a client with a fiber optics route from A to B. At the same time, they offer alternative routes over a completely different route that this client also takes. In this way, the company can be sure that a connection always exists between data center A and B, even if one of the routes unexpectedly fails. That doesn’t happen very often, incidentally, so you can imagine the kind of security these large companies build in to have four different routes to the same data center. This does involve corresponding costs, and they would not pay off for households.”


APG, on behalf of ABP, will become a direct shareholder of euNetworks and will support the company in further developing their strategic vision. What exactly does that entail?
“As Team Infrastructure at APG, we invest directly in companies, without another fund manager involved. This gives us a direct say on the supervisory board and allows us to help determine strategy. It is not like APG is going to be sitting in the management’s chair. You have to let them do their own thing, because that’s where most of the knowledge of the company is. What we bring to the table is the financial-strategic know-how and knowledge we have gained from similar companies in our portfolio, where there are often similar issues concerning strategy, governance, financing and regulation. For example, we set up a joint venture with KPN called Glaspoort, which provides households with fiber optic connections, and another one in Poland with Orange Poland.”

Companies not only bring their production but also their data back to Europe

euNetworks claims to have a leading position in the market when it comes to sustainability. How does this manifest?
“euNetworks is already quite advanced in realizing sustainability measures and goals. For example, they buy almost all the energy they need sustainably. And the devices they use to activate the fiber optic connections are selected for minimal energy consumption. In addition, they have set sustainability goals for the coming decades. One example is the ‘net-zero carbon’ initiative for 2040. They get progress in this area independently verified annually. They also report on this. They are already further ahead with this than many other companies.”


The investment in euNetworks is for the long term. How do you know that a company like this will continue to be a market leader in the future?
“You can never guarantee that, but we have analyzed very carefully what types of clients the company has now and what the churn rate is: how many clients have switched to another network in the past? euNetworks’ network and service turn out to be of such high quality that relatively few clients switch. In fact, many clients are expanding the number of services they purchase. In short, the combination of a wide variety of fiber optic products and a unique, widespread European network ensure clients that stick around. euNetworks is also continuously improving the scope and quality of its network and associated services.”


How do you see the future of the fiber optic market?
“There is still a lot room for growth. That is also the reason why we were very keen to take this step into the B2B market. In recent years there has been tremendous growth in the demand for data, and that growth continues to be exponential, market trends confirm. Think of developments such as cloud-based working, the ‘internet of things’ (the network of things such as household but also industrial devices that can connect to the internet and thus exchange data, ed.) and smart cities (city or region in which technology is used to improve public space, ed.). There is also onshoring, with companies bringing not only their production but also their data back to Europe. European regulations require the same, to prevent data from disappearing to data centers outside the EU. These are all trends that will further increase the demand for data, requiring even more fiber optic connections between data centers, which is what euNetworks is providing. This growth will occur mainly in Central and Southern Europe and Scandinavia, because Western Europe is reaching its limits in terms of the number of data centers.”