Pension fund ABP is helping KPN accelerate implementation of a fiber-optic network, it was announced at the end of March. APG, ABP's pension administrator, is starting a joint venture with KPN for this purpose. But what should a pension investor in fiber-optic technology do? And what does that mean for retirees?
At the end of last year, KPN announced that it was fully committed to the roll-out of fiber-optic connections in the coming years. With the replacement of the old copper network by super-fast Internet connections via optical fiber, KPN wants to offer both consumers and companies better support for their digital activities. Good news for both (more and more home-working) individuals and companies that offer more and more digital services.
How many more people will benefit from this announced 'acceleration'?
KPN's original plan was to provide 2.5 million households in larger municipalities with fast Internet via optical fiber in the next five years. This would serve a total of 65% of all Dutch households. As a result of this joint venture, some 900,000 fiber-optic connections will now be added, mainly in villages, bringing the counter to 80% by the end of 2026. Good for the customer, and KPN is thus accelerating the roll-out of its fiber-optic network.
The benefits for KPN are clear, but why is ABP joining in?
Senior portfolio manager Laurens-Jan Sipma, who coordinated this joint venture with KPN on behalf of APG: 'In addition to equities, bonds, real estate and commodities, we also invest part of our portfolio in infrastructure. Examples include wind farms, electricity networks, highways and airports. This also includes projects in the telecommunications sector, such as transmission masts for mobile telephony and therefore also fiber-optic networks. Optical fiber is a future-proof technology, not only because of its speed and scalability, but also because it's a relatively energy-efficient technology.'
Is this joint venture also of public interest?
Sipma: 'Fast fiber-optic connections offer advantages for all kinds of sectors. The health care industry, for instance, will make more and more frequent use of video consultations in the coming years. Or a patient who wants to e-mail a photo of, for example, a skin condition to his doctor from home: you really need a fast, secure Internet connection. Optical fiber offers that and it's a better alternative than the cable or the old copper connection. But there are also other public interests: the accelerated roll-out will create more than a thousand extra jobs. We currently have a greater need for the people who are going to lay all those cables, such as engineers, planners, welders, you name it. Also, optical fiber is more sustainable, because it requires less energy than copper or cable. Last but not least, super-fast Internet gives a strong impetus to the economic growth of the Netherlands. All in all, this joint venture clearly meets ABP's ambitions and wishes. '
Does an investor like APG know enough about fiber-optic technology?
Sipma: 'Oh, yes. For example, we previously made an investment in Conterra in the US, a company that has an extensive fiber-optic network and is expanding. And in France, we invest in TDF, which is now also rolling out optical fiber to around one million French households in rural areas. So we know very well which teething problems you can encounter with optical fiber and what the risks and possibilities are. But when we assessed this business case, we naturally also performed analyses with a range of external specialists.'
What return can customers and participants expect from this deal?
Arjan Reinders, Head of the APG team that invests in European Infrastructure: 'The investment in this joint venture, in which KPN and APG, on behalf of ABP, each have a 50% stake, involves a total amount of more than one billion euros. APG is responsible for 440 million euros of this. The first half immediately when the contracts are signed; we will transfer the other 220 million euros in installments, depending on the pace of the actual roll-out. The return we expect on this investment is in line with the returns we normally achieve for our clients on this type of infrastructure investment. On average, about 7% per year. Once the roll-out is complete, we will receive an annual dividend. In short, this is a very solid investment for us.'
Isn't the choice of such a joint venture a bit unusual for an investor like APG?
Reinders: ''Well, it may seem a bit strange to outsiders, but it's familiar territory for APG. It's not the first time we've done this. Working together within such a joint venture gives us control as a co-shareholder. It's a fairly flexible form, with its own management team and supervisory directors. The joint venture is separate from KPN itself, which, like us, is a shareholder. KPN will of course take care of operational management, because that's where their expertise lies. We do have a say in the pace of the roll-out and whether we want to roll it out in other areas. We also offer expertise in the fields of investment and financing decisions.'
If all those fiber-optic connections have been made, can other telecommunications providers also use them?
Reinders: 'Yes, they can. KPN will soon be the main tenant on the network, but other telecommunications players can also rent access from the joint venture. Which of course further strengthens the solidity of this investment for APG.'