Are Scarce Access Assets Still So Valuable?

Telefónica Group, Crédit Agricole Assurances and Vauban Infrastructure Partners are joining to create Bluevia Fibra to build fiber to premises networks in rural parts of Spain. 

The consortium formed by CAA/Vauban will acquire a 45 percent stake in Bluevia from Telefónica España. Telefónica Group will retain a 55 percent stake in Bluevia. 

The 55 percent stake owned by Group Telefónica will be held by Telefónica España and Telefónica Infra, with 30 percent and 25 percent stakes respectively.

Operating with a wholesale model, Bluevia will offer wholesale FTTH access to all telecommunication services providers. Based on an initial footprint of 3.5 million premises currently passed, Bluevia will increase its network to five million premises by 2024.

Bluevia’s anchor tenant, as you might guess, will be Telefónica España. The deal is among many globally where service providers try to decrease the cost of building new infrastructure by partnering with investment firms looking for long-term, stable cash flows in the digital infrastructure area. 

Other joint ventures that, in part, are aimed at reducing investment and debt burdens, are happening in other markets, by other fixed network providers. Liberty Global, Telefónica and InfraVia Capital Partners have formed a joint venture to build seven million fiber-to-premises passings in the United Kingdom. 

Liberty Global and Telefónica will jointly hold a 50 percent stake in the venture through a holding company, with InfraVia owning the remaining 50 percent. Telefónica Group’s participation will be held through Telefónica Infra, the firm's infrastructure unit. 

Both deasl might also raise issues about the value of access assets to tier-one telcos and other different stakeholders. Though access assets always have been seen as sources of business value, the perception of value has changed over the past few decades. 

Though necessary, access infrastructure often is not viewed as adding proprietary value. So full ownership is less valuable than in the past, while the freed-up capital is deemed more valuable. 

Historically, scarcity has driven the value of access networks. It still does. Institutional investors value precisely that relative scarcity as a driver of long-term investment value, as such investors have valued real estate assets. 

But network infrastructure scarcity is largely eliminated as a competitive issue when assets are structurally separated, it can be argued. While it also can be argued that owners’ economics often are important, compared to renting access from a wholesale provider, the loss of potential margin and differentiation is counterbalanced by the reduction of capital investment burdens as well. 

Wholesale access also arguably changes the nature of competition. When every retail provider has the same access to network features (latency, speed, wholesale price), competitive distinctiveness has to be found elsewhere. 

And, most of the time, such distinctiveness happens with non-network features and value, typically when different features are bundled as part of network-based offers. The larger point is that competition seems to be shifting away from “scarcity” and towards other elements of the experience. 

In the mobility business, spectrum scarcity remains an issue, but is improving, relatively speaking. That is reflected in declining per-MHz spectrum costs, even if physical infrastructure costs intensify. 

And much traditional infrastructure--especially towers and radio sites--no longer are considered “must have” assets to own. To the extent networks are differentiated, it is on the basis of ownership of spectrum assets and other bundled features, not radio sites. 

Executives likely hate the idea, but physical access assets are more commoditized, and less value-driving, than access assets used to represent. Increasingly, it is the intangible assets that drive value.