Eurofiber is a B2B fibre provider with a network covering the Netherlands and an increasing presence in Belgium, as well as a branch extending into Germany. Private equity owner Doughty Hanson, which bought a majority stake in the company in 2012, and…
Eurofiber is a B2B fibre provider with a network covering the Netherlands and an increasing presence in Belgium, as well as a branch extending into Germany.
Private equity owner Doughty Hanson, which bought a majority stake in the company in 2012, and local investor Reggeborgh sold their stakes to Antin Infrastructure Partners for €875m in May 2015.
TF: The B2B fibre space is in the limelight, with deals achieving EBITDA margins in the high teens and US consolidators such as Zayo and Level 3 moving into Europe. Can you tell us what has changed, and what Eurofiber’s story is?
AG: There was a huge overbuild in 2000s, leading to distressed assets coming onto the market. At that point supply far exceeded demand. With demand so high for data, companies are now deploying once again.
In the Netherlands, we started deploying to mobile operators needing backhaul, and then to corporates (first large, and then medium). While some fibre providers focus on backhaul between main hubs, Eurofiber meshes out networks. So it’s less international backhaul, and more local densification, and always demand driven.
TF: What are Eurofiber’s plans under its new ownership?
AG: It’s business as usual. We already had a plan to further deploy our network. We are also building out co-location, especially in the Netherlands. Antin was fully supportive of our €33m acquisition of [Belgian rival] B-Telecom, which took place within weeks of our change of ownership.
TF: Will the company continue to consolidate in its existing markets, or look to new European markets?
AG: We are now discussing with our new owners the best way to accelerate expansion, which may be in-country or establishing a new footprint. What’s important is that we go one step at a time: buying, and then taking the time to integrate before buying again.
If we expand beyond our current footprint, we would look only at contiguous markets where we can achieve synergies. That means Belgium, Germany, Luxembourg and France, but we have not ranked these and have plenty of time to develop our plans.
TF: Is it easier to consolidate, since the B2B fibre space isn’t as regulated as the consumer segment?
AG: That’s not strictly true, as incumbents are often regulated on the B2B side as well as B2C. Telecoms challengers do not tend to be regulated in the services and infrastructure space. We believe in open access infrastructure, and compete on the infrastructure layer, rather than in services. We don’t want to compete with our customers or the global services providers. The fundamentals of an infrastructure owner and provider are different, so we in the B2B infrastructure space do have a higher EBITDA multiple, and by focusing on fibre, a faster and higher growth profile.
TF: Where do you think we are in the European fibre consolidation process, how much further is there to go?
AG: In the Netherlands, the market is quite mature, but we haven’t yet reached 50% build-out so there’s a lot of growth to go before we reach saturation. In-country build-out and consolidation will take at least five years, while cross-border consolidation will run in parallel. This in fact mirrors what is going on with consumer facing telcos, and in-country consolidation there does impact B2B fibre. It’s a local game.
TF: To what extent will Europe be able to consolidate as the US market has?
AG: At Eurofiber, we need to follow our customers. So, for pan-European customers, yes, we need to have a pan-European presence. There can be a business opportunity in countries lacking B2B infrastructure.
That said, Europe is very fragmented, with different languages, cultures and regulations. Creating a deeply meshed European operator is not a very straightforward task.
TF: What role, if any, can B2B fibre operators play in the roll-out of national high-speed broadband networks, in a similar way as Italy’s Metroweb may do, for example?
AG: Build-out is taking place at different rates in different countries, with the Netherlands for example having multiple fibre networks. In Italy, the incumbent, challengers and fibre owners Metroweb and Fastweb may all play a role, but I’m not sure whether this is a template.
TF: Which companies in other countries do you most admire?
AG: Innexio in Germany, and a few in Scandinavia. No one has created the national network Eurofiber has created – but again, the Netherlands is different.
TF: What about Zayo, which having consolidated across the US, has entered Europe via acquisitions of US-based AboveNet, France’s Neo Telecoms and the UK’s Geo Networks?
AG: Zayo has a very similar business model, focusing on bandwidth and growing through M&A. We’ve grown through a mix of organic and inorganic growth. I think we both have come out of nowhere in the last ten years to become national players.
TF: Do you work with the same advisers on every deal? Should advisers approach you with ideas?
AG: Our M&A advisers change according to the project and the country. Our door is always open, so people often bring us ideas for future growth plans.
TF: What is your budget for acquisitions?
AG: We have a long list of targets, but not a war chest per se. We do, though, have funds available in both equity and debt. We will have the capacity for several acquisitions in the coming years.
TF: Who provides your finance?
AG: We have an existing syndicate of local and European banks, secured as part of our acquisition by Antin, but I can’t specify the amount. We do have room for acquisitions within our debt facility. We have equity available as well, both from our shareholders and our balance sheet.
TF: When will we see the next change of ownership at Eurofiber?
AG: I expect it to be within a longer horizon of five to seven year timeline, rather than three to five years.
