The findings of a joint study by Boston Consulting Group (BCG) and EDHECinfra, a venture of the international EDHEC Business School, published recently, reveals that large markets such as Nigeria, Ghana, South Africa, Brazil and parts of Asia, have huge potential to attract digital infrastructure projects but are untapped markets for fibre optics investments.
This, according to the report, can be linked to uncertain economic growth that has made fiber-penetration levels uneven, despite a clear demand for fiber infrastructure projects.
In the new report entitled ‘Infrastructure Strategy 2022: A Pivot to the Digital Frontier’, Boston Consulting Group (BCG) and EDHECinfra provide a new perspective on the investment strategies and risk-adjusted performance of different groups of infrastructure investors.
According to the report, “Although demand for fiber optic projects is most pronounced in less-wealthy economies, large and diverse regions with significant potential, such as Nigeria, Ghana, South Africa, Brazil, and parts of Asia, are untapped markets, as fibre penetration is also uneven in places where economic growth is less uncertain.”
The study points out that the increasing desire for higher speeds and reliable online access will inevitably lead to a huge expansion of fiber optic installations in new networks in low and middle income nations as well as in existing networks in higher income countries. Ultimately, fibre, which has already begun to make inroads in networks everywhere, will replace legacy (primarily copper) infrastructure completely, particularly as 5G rolls out.
Analysing the report findings, the Managing Director and Partner, BCG Nigeria, Stefano Niavas, said: “Fibre optic investment is required to expand the capacity of the undersea cable infrastructure on the shores of Nigeria beyond the cities to other regions of the country in order to make connectivity truly ubiquitous.With the growing demand for fast and reliable Internet connectivity, investing in digital infrastructure is profitable and it is expected that investment in fibre installations all over the country will accelerate in a few years from now.”
The report has key findings, and one of them is: A Pivot to the Digital Frontier. As the analysis shows, all investors are planning to over invest in digital infrastructure going forward. While this also entails data centres, towers, satellites, and subsea connections, the appetite for broadband connectivity remains high.
BCG’s Managing Director and Partner and a Co-author of the report, Roman Friedrich, said: “The increasing desire for higher speeds and reliable online access will lead inevitably to a huge expansion of fibre optic installations in new networks in developing nations as well as in existing networks in more developed countries. Ultimately, fiber will replace legacy (primarily copper) infrastructure completely, particularly as 5G rolls out.”
Another finding is on the North American Pensions Funds that have the highest risk-adjusted returns in 2021 and are in the top ranked peer group. Other peer groups took more risk to achieve lower average returns, while Canadian investors are very close to the all-investor average. At the bottom of the risk-adjusted rankings, EU and UK pension funds take less risk but also achieve comparatively lower returns.
The Director of EDHECinfra and Co-author of the report, Frederic Blanc-Brude, while analysing the report, said: “Certain investors have gained exposure to different segments of the infrastructure universe over time and each segment has performed differently.”
The report said one-third of the surveyed investors expressed that they want to decrease their exposure to conventional power generation. According to the report, the main beneficiary of the 2021 recovery, after transport, was gas and conventional power generation, especially since wind levels were lower than usual.