Demand for dark fiber from network providers in Europe is being driven by significant industry trends, including the roll-out of 5G, the Internet of Things (IoT), cloud computing, artificial intelligence, augmented reality & virtual reality, and ultra-high-definition video.
However, in Europe, many of the recent M&A transactions have been focused on fiber-to-the-home (FTTH) and building-out open access wholesale fiber networks. Indeed, this trend has been showcased by recent joint ventures from leading digital infrastructure investors such as APG, EQT, KKR (twice), Macquarie, Morgan Stanley, and Toscafund.
With many consumer-facing fiber projects now initiated, investors are increasingly turning their attention towards investing in dark fiber, for business-to-business (B2B) purposes, across Europe.
Dark Fiber Demand Drivers in Europe
Dark fiber will be an important investment theme in Europe over the next 5+ years as it is critical for connecting together all the components of digital infrastructure, which are being rapidly built-out. Specifically, dark fiber is needed for data center connectivity (particularly to hyperscale customers), mobile infrastructure (towers and small cells), and eventually, edge computing.
Dark fiber is crucial to ensuring rapid connectivity between existing data centers in the “FLAP” data center hubs of Europe. Specifically, these markets include Frankfurt, London, Amsterdam, and Paris. Furthermore, the FLAP data center market is growing from 1,843 megawatts of power capacity at year-end 2020 to reach over 2,200 megawatts of power capacity by the end of 2021. In turn, these new facilities will require more dark fiber connectivity.
Additionally, dark fiber facilitates private and secure connections into the largest hyperscale customers or cloud service providers. Specifically, these customers include Amazon Web Services (AWS), Microsoft Azure, and Google Cloud.
Dark fiber is vital for fiber-to-the-tower (FTTT), small cells, distributed antenna systems (DAS), Wi-Fi, and fixed wireless access (FWA) deployments. Specifically, Europe’s largest wireless carriers, including Deutsche Telekom, Vodafone, Telefónica, and Orange need dark fiber to connect and backhaul their tower base stations to central sites. Indeed, tower base stations use immense and increasing amounts of data traffic, particularly with the introduction of 5G to consumers.
In Europe, providers of neutral-host infrastructure for mobile networks are beginning to emerge. Particularly, given the 5G network densification needs for wireless carriers and the more comprehensive fiber connectivity that it requires. For example, European companies leading in the continent’s shared infrastructure build-out include Freshwave Group, Ontix, and Wireless Infrastructure Group.
In Europe, edge computing remains nascent. However, given that European wireless carriers need to reduce their infrastructure costs, the notion of edge computing is beginning to emerge. Particularly, as the network architecture begins to incorporate more C-RAN (cloud-RAN or centralized-RAN) and O-RAN (Open Radio Access Network).
Edge computing in the form of C-RAN hubs, aggregates the mobile network and applications closer to the end user, in order to reduce latency. However, to enable this change in network architecture, dense dark fiber, with multiple paths, must be built into these C-RAN hubs. Long-term, dark fiber is essential to facilitating edge computing.
Dark Fiber Operators in Europe
Below we profile five of the most important providers of dark fiber networks, which focus on Europe. Notably, we exclude global fiber providers like Lumen Technologies and Zayo Group, which also have significant dark fiber deployments in Europe.
Over the past years, dark fiber investment opportunities in Europe have been highly sought after by global private equity firms. Specifically, these investors include Stonepeak Infrastructure (euNetworks), Antin Infrastructure (Eurofiber and Lyntia), I Squared Capital (GTT’s Infrastructure Division), and Digital Colony (Zayo).
euNetworks owns 20.1k fiber route miles (32.4k fiber route kilometers) throughout Western Europe, with its largest markets being Germany, the UK, Ireland, and the Netherlands. In terms of data center connectivity, the company’s fiber network directly connects to 440+ different facilities in Europe.
Overall, euNetworks provides metro and long-haul services including dark fiber, wavelengths, and ethernet. The company delivers these high-bandwidth services to customers in the wholesale, finance, content, media, data center, and enterprise segments.
euNetworks’ key shareholder is Stonepeak Infrastructure Partners’ $3.5bn Fund II.
Eurofiber has 23.8k fiber route miles (38.3k fiber route kilometers) in the Netherlands, Belgium, France, and Germany. In terms of data center connectivity, the company’s fiber network directly connects to 215+ different facilities in Europe. Indeed, Eurofiber offers interconnectivity between nearly all carrier-neutral data centers in the Netherlands and Belgium through its DCspine business.
Overall, Eurofiber serves customers in the wholesale, data center, enterprise, finance, government & utilities, education, and healthcare sectors.
Eurofiber’s key shareholders are Antin Infrastructure Partners’ €2.0bn Fund II, and Dutch pension fund PGGM.
GasLINE operates 17.4k fiber route miles (28.0k fiber route kilometers) across Germany. In terms of data center connectivity, the company’s fiber network directly connects to data centers and points-of-presence (PoPs) in 200+ cities throughout Germany.
Overall, GasLINE offers dedicated networks, cable routes, and connections delivering customized networks for carriers, local governments, and enterprises. Additionally, the GasLINE network links-up with third-party dark fiber networks allowing onward connectivity to major capital cities in Europe. Specifically, these cities include London, Paris, Warsaw, and Vienna.
GasLINE’s key shareholders are 10 gas transmission and regional gas distribution companies in Germany.
Lyntia (formerly Ufinet Spain)
Lyntia has 26.0k fiber route miles (41.8k fiber route kilometers) across Spain. In terms of data center connectivity, the company’s fiber network directly connects to 40+ different facilities in Spain.
Overall, Lyntia provides nationwide metro and long-haul services that connect to Spain’s key internet exchange points and cable landing stations. Notably, the company focuses on the wholesale customer segment.
Lyntia’s key shareholder is Antin Infrastructure Partners’ €3.6bn Fund III.
GTT (Infrastructure Division)
GTT’s Infrastructure Division owns 64.0k fiber route miles (103k fiber route kilometers) in Europe and North America. In terms of data center connectivity, GTT’s fiber network directly connects to 400+ different facilities in Europe and North America.
GTT’s Infrastructure Division includes network and data center assets from the company’s prior acquisitions of Interoute, Hibernia, and KPN International. Presently, I Squared Capital is in the process of acquiring the the Infrastructure Division for $2.15bn.