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.”