The New Infrastructure is Digital

Strategic Shift in Infrastructure Focus

• In 2006, the firm's initial infrastructure funds targeted traditional sectors: transport (ports, airports, roads, rail), regulated utilities (electricity, gas, water transmission/distribution), and energy storage/transmission.
• Digital infrastructure was not a primary focus in 2006 but has become the "corest" and most important asset class in the last five to ten years.
• The pandemic highlighted the critical nature of digital infrastructure while traditional transport assets (roads, airports) saw dramatic volume declines.

Definition and Sub-sectors of Digital Infrastructure

• The firm defines its digital infrastructure bucket strictly to include:
  • Telecom towers (sub-divided into rooftop, rural, and urban segments requiring specialized investment).
  • Fiber networks (categorized by geography—rural/urban, municipality/city—and usage—residential/business).
  • Data centers (split between hyperscalers and co-location facilities).
• Capital deployment trends have shifted over the last decade:
  • 10 years ago: Focus was predominantly on mobile phone towers.
  • Last 5 years: Focus shifted to fiber.
  • Present: Capital is moving heavily toward fiber and data centers.

Pandemic-Driven Demand and Economic Necessity

• The crisis accelerated a "contact-free economy" across multiple sectors:
  • Work: Shift to remote operations.
  • Finance: Banking moved entirely online; physical branch visits ceased.
  • Retail: Grocery delivery取代 physical store visits.
  • Education: Emergence of e-learning.
  • Healthcare: Rise in online doctor consultations and prescriptions.
• Satisfying this demand requires significant capital investment specifically in fiber and data centers to process and transport data.

Regional Disparities and Investment Opportunities

• UK Fiber Penetration: Currently at 10% (up from barely 3% a few years ago), lagging significantly behind:
  • Southern Europe (Spain, Portugal): >80% penetration.
  • Southeast Asia: Up to 100% penetration.
• City Fiber Expansion (UK):
  • Deploying fiber in 26 cities as of the interview date.
  • Targeting deployment in 100 cities by year-end.
  • Expected to create approximately 10,000 jobs.
• Job Creation Strategy: Digital infrastructure rollout is viewed as a key mechanism for economic relaunch and job creation post-crisis.

Future Outlook and Regulatory Needs

• The firm anticipates digital infrastructure will function as a fundamental utility, requiring government intervention to ensure fair access and pricing.
• Potential Regulatory Frameworks Include:
  • Establishing lower hurdles for network sharing between different providers.
  • Providing subsidies specifically for rural fiber deployment.
  • Addressing the divide between urban and rural connectivity.
• The long-term goal is to create a well-functioning telecom network with standardized accessibility, pricing, and shared infrastructure.