Introduction
Agreements
Commercial and technical issues
Digital infrastructure remains attractive for investors and infrastructure companies (InfraCo) capitalising on telecoms operators freeing up their balance sheet to fund costly network upgrades, spectrum rights or new infrastructure into further service areas.
Meanwhile, many telecoms operators are looking for new sources of growth for their core businesses, including through consolidation, diversification and focusing on strategic higher-value services or tie ups with hyperscalers.
Some fundamental truths lie at the heart of realising crucial revenues and to deliver any anticipated valuation in a new digital infrastructure investment:
- key commercial agreements – a series of agreements between investors, infrastructure owners, the InfraCo's operator customers and specialist suppliers are absolutely critical to creating and securing value and delivering new digital infrastructure over the relevant horizon; and
- technical and operational integrity – the ongoing integrity and future expansion capacity of the underlying digital infrastructure asset to deliver revenue generating services, together with any accompanying monitoring, maintenance and upgrade procedures or requirements.
The primary agreements required between investors, infrastructure owners, the InfraCo's customers and suppliers include those shown in the following table.
Figure 1: primary agreements required
The technical, operational, historical and regulatory reality on the ground and the parties' respective business plans will dictate how these documents need to allocate risk between the parties, generate value for the InfraCo and deliver the required services and infrastructure access to customers.
These realities are usually first covered by conducting thorough due diligence, devising any remediations and then documenting them accordingly. Thoroughly and clearly accounting for these risks is critical to ensure the success of these digital infrastructure transactions and arrangements.
Commercial and technical issues
Potential digital infrastructure stakeholders should be alive to commercial and technical issues that are unfortunately common in these arrangements, spanning network design and construction, network performance and upgrade cycles through to maintenance, service assurance and personnel expertise. There may well be a reason for historically low investment or expansion in necessary infrastructure and support services, whether due to technical, operational, organisational or regulatory reasons.
While these issues are not usually fatal, critical issues that affect current asset performance and future scalability and development may have business plan and valuation impacts that need to be addressed in proposed pricing or risk sharing arrangements to properly incentivise the participating parties.
For further information on this topic please contact Marcus Bagnall at Wiggin by telephone (+44 20 7612 9612) or email ([email protected]). The Wiggin website can be accessed at www.wiggin.co.uk.