European Investment Bank

EIB Financing of NGA Networks

Harald Gruber

“Every European Digital” Conference, European Parliament Brussels, 31 May 2011

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Europe 2020 - Digital Agenda

I.  Broadband Infrastructure Development

II. Application and Diffusion of ICT Across Sectors (Digital Single Market, Digital Inclusion, eGovernment)

III. ICT R&D and ICT Applications for Low Carbon Economy

*EIB Classification

Digital Agenda Broadband Targets

Broadband Category* Access Speed* Enabling Technologies*

Target I: Basic Broadband for all by 2013

Basic Broadband

150 kbps – 30 Mbps

Copper (ADSL2, VDSL1, SDSLS), Cable (EuroDOCSIS 1.1/2), Mobile (EDGE, 3G, HSPA), Wireless (WiMax), Satellite

Target II: High or very high speed access to all by 2020 (30 Mbps or above)

High Speed 30 Mbps – 50 Mbps Copper (VDSL2), Mobile (HSPA+, LTE)

Very High Speed 50 Mbps – 100 Mbps FTTH (GPON, PtP), Mobile (LTE advanced)

Target III: 50% or more of EU households subscribe to Internet access above 100 Mbps by 2020

Ultra High Speed 100 Mbps – 1 Gbps FTTH (NGA1, NGA2, PtP), Cable (EuroDOCSIS 3)

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EIB contribution to the Europe 2020 Strategy and the Digital Agenda

"  EIB addresses the whole spectrum of ICT investments in tangible and intangible assets (from broadband through semiconductors, equipment manufacturers and services) as well as investments in ICT RDI though the Bank’s various products.

"  Almost all large European ICT companies benefit from direct EIB financing for their projects.

"  Smaller companies are supported through global loans provided by EIB partner banks or through venture capital provided by the European Investment Fund, a member of the EIB Group.

"  For the inherently risky RDI projects, the EIB conventional financing products may also be blended with other more innovative instruments that entail a higher level of risk, including the use of the Risk Sharing Finance Facility (RSFF).

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"  Average annual lending for broadband projects for the last ten years was c. EUR 1.1bn (EUR 1.7bn for 2007-2010)

"  During the last financial crisis, EIB increased lending to broadband projects by over 50% with signatures for 2009 of EUR 2.3bn

"  In 2009, loan approvals in the ICT sector reached EUR 3.9bn

"  Approximately 40% of these were for ICT Research, Development and Innovation

"  More than 50% of the approvals were for broadband projects including land, mobile and satellite

"  Nearly 2/3 of the approved broadband projects were fixed solutions

For an updated list of projects visit: http://www.eib.org/projects/loans/sectors/telecommunications.htm

EIB Broadband Financing: direct loans for broadband infrastructure 2000 – 2010

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"  Investment requirements in excess of EUR 200 bn, with 2013 target requiring close to EUR 10bn.

"  Though economically justified, substantial part of has questionable financial profitability, especially in non-urban areas

"  Scope for public sector in generating critical demand (e.g. e-government, e-health) and new instruments for procurement (pre-commercial procurement)

"  Role of financial instruments, in particular widening of RSFF, but also PPP and equity instruments

Conclusions for Digital Agenda

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Backup slides

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ZON Multimedia (Portugal)

EUR 100m

Project:EUR 307m (i.a. FTTH)

09-2009

Reggefiber Group B.V. (The Netherlands)

EUR 130m RSFF

Project: EUR 290m (FTTH)

10-2010

Fastweb S.p.A. (Italy)

EUR 350m

Project: EUR 850m (ADSL & FTTH)

02-2009

Iliad SA (France)

EUR 150m

Project: EUR 800m (FTTH & xDSL)

07-2009

Portugal Telecom (Portugal)

EUR 200m

Project: EUR 750m (FTTH)

07-2009

SONAECOM (Portugal)

EUR 75m

Project: EUR 152m (FTTH)

02-2010

M-Net Breitband Munchen (Germany)

EUR100m

Project: EUR 205m (FTTH)

12-2009

Alphasat (UK)

EUR 225m RSFF

Project: EUR 598m (Broadband Satellite)

04-2010

For an updated list of projects visit: http://www.eib.org/projects/loans/sectors/telecommunications.htm

European Investment Bank Broadband Financing: Broadband examples (2009 – 2010)

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Cost per country

•  Big 5 require between 63%-72% of the total cost (France, Germany, Italy, Spain and the United Kingdom) – with 62% of population!

•  Rest of Europe consists of a heterogeneous sample of leading infrastructure: Belgium, Latvia and Slovenia together with poor infrastructure countries: Cyprus, Greece and Poland.

•  Country-members have different infrastructural needs under the Digital Agenda umbrella •  EU15 share from total ranges between 80%-84%

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EIB Existing Instruments Projects must be:

•  Technically sound •  Financially viable

•  In compliance with regulation •  Show acceptable economic return

European Investment Bank Addressable Market Segments

Black Areas

Estimated total investments EUR in excess of 200bn until 2020* - on average c. 50% of the total market cap for the sector

Black areas EUR 80-90bn**

Grey + White

Certain Grey Areas

White & Certain Grey Areas Government funding plus “New risk-sharing instruments” or modified existing ones will be needed

Source: EIB estimates * Band based on various studies and assumptions ** Black areas estimates based on industry forecasts

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Different interpretations lead to different scenarios for the Digital Agenda targets

•  Four scenarios, with different interpretations of each target: "  Minimum: Theoretical speed, with internet centres in rural areas (ADSL2, Internet

Centres, VDSL2, EuroDOCSIS 3.0, FTTB) "  Base: Theoretical speed, coverage to the household (HSPA, VDSL2,

EuroDOCSIS 3.0, FTTB, FTTH) "  Advanced: Actual Speed, coverage to the household (ADSL2, LTE, VDSL2,

EuroDOCSIS 3.0, FTTB, FTTH) "  Maximum: Actual symmetric speed, coverage to the household (G.SHDSL2 and

Fiber) •  Every target in each scenario for each area leads to a range of technological

solutions. •  Countries were further split into urban, suburban and rural areas, as the population

density is the key determinant of technology deployment cost