Community Fibre, an independent company in London, is now going ahead with its rapid expansion of fibre-to-the-home (FTTH) services, thanks to a £400 million investment this year by private equity group Warburg Pincus in association with Deutsche Telekom Capital Partners (DTCP). That deal gives them a controlling stake.
“I plan to connect a million homes by 2023,” says Olaf Swantee, who became an adviser to US-based Warburg Pincus after leaving Swiss mobile operator Sunrise at the beginning of 2020. That will give Community Fibre access to more than a quarter of all homes in London, making it a significant rival to Openreach, the last-mile operator owned by BT that also connects other UK broadband companies.
It will also compete with CityFibre, which earlier this year spent £200 million buying FibreNation from TalkTalk, a rival to BT. CityFibre is backed by US bank Goldman Sachs and a European firm, Antin Infrastructure Partners. Another FTTH firm, Hyperoptic, is owned by private equity investor KKR.
In spite of this competition, “I was surprised by how much the UK is still behind in FTTH,” says Swantee, now executive chairman of Community Fibre. “The UK is the fifth largest economy in the world, but it’s number 35 [in fibre] out of 37.”
Affordable internet
How will Community Fibre differ from its rivals in the market? “We’ve started in social housing,” says Swantee, a Swiss citizen.
“These apartments will have good internet at an affordable price.” At the moment, “they don’t typically have good internet”. And during the pandemic “they’re spending more time with the family in their apartments”.
Community Fibre has a number of packages from 50Mbps at £20 a month to 1Gbps at £49 a month, all with free installation and activation.
But the company will also serve community centres “with a fantastic internet package” and to single houses rather than just apartments. “Our focus is on London,” he says. “Clearly we have an ambition to think about what we can do outside London, but we’re keeping the team focused.” There are 3.9 million households in London, he notes: that gives the company plenty of scope for the next few years.
With the new investment, it is ramping up operations. “We will double the number of contractors [working on installations] by the end of this year,” he tells me. “That is such a powerful story, creating employment in one of the biggest crises we’ve ever had. We’re a relatively small company, spending hundreds of millions on infrastructure to build out FTTH.”
Community Fibre has had approaches from other cities, he confirms. “We are working with big landlords, and they are giving us wayleaves to allow us to plan the build. Many of these firms have properties outside London. They like how we build.”
He won’t say where outside London the company is thinking about – those are decisions for the management and the board. “But it’s good to have teams on the ground in London,” he smiles.
Swantee is speaking to me from his home in Zürich, but he has been visiting London frequently, certainly following the completion of the deal in mid-August. He knows London well.
After starting in the IT industry, in 2007 he was hired by Orange to head its operations in Europe outside France and its mobile operations worldwide. He was Paris-based but was frequently in London.
Launching 4G in London
Then Orange and Deutsche Telekom merged their UK mobile operations into EE, and in 2011 Swantee took over as CEO after the first year. He spent four and a half years in the London-based role, launching the UK’s first 4G services during his time there.
Swantee was also a non-executive director of T-Mobile US until 2019, and he’s been a non-executive director of Telia Company in Sweden since 2016.
For four years until January 2020 he was back in Switzerland, leading Sunrise — but his role there unravelled when he proposed a €5.5 billion takeover of Liberty Global’s cable business in the country. He failed to win support of Freenet, a German operator with a 24% stake in Sunrise. Swantee left, and months later Liberty Global put in a bid for Sunrise, worth €6.35 billion, that had Freenet’s approval. The deal was announced just as Swantee was taking over executive chairmanship of Community Fibre.
He refers back to his EE days when we talk about FTTH investment in London. “People ask why we need to deliver 1Gbps,” he says. “But when I launched 4G, people also asked why anyone would use 4G.” The answer is: “If you make capacity available, it will be used. It is absolutely certain that it will be used.” Internet usage is doubling every 18 months in Europe, he says, especially with the arrival of very high definition television.
Latency-hungry gamers
“In fact at Community Fibre we’re looking at more than 1Gbps. Computer gaming is more data hungry and more latency hungry. Gamers see the difference between 8ms latency and 20ms. You and I wouldn’t notice, but they would.” That’s why Community Fibre has decided to invest in end-to-end fibre. “Everything else is a compromise.”
He compares the fastest non-FTTH technology that’s around, the DOCSIS standard that is used by cable operators. It might offer 1Gbps in the latest version, but upload is capped at 300Mbps, he says. “Cable is not fit for the future, and ADSL [the technology used for broadband over copper] is certainly not.
Swantee has experience of FTTH before — at Sunrise. “There for the first time I saw the power of FTTH in combination with a great mobile network. You need strong mobile networks and FTTH — and 5G for areas you can’t get fibre.” That will be 5G for fixed wireless access (FWA), he notes — and laments that the way spectrum is allocated in the UK makes it less suitable for FWA.
“In the UK spectrum is in 40MHz blocks and it’s a little bit difficult to get FWA. You need 100MHz blocks, and that can deliver equivalent speeds to FTTH. If you have 40MHz, it’s literally less than half.”
BT, which now owns EE, “is saying it can use carrier aggregation to get 1Gbps, but it’s not ideal”, says Swantee. Carrier aggregation combines signals carried on different parts of the spectrum to give more bandwidth.
For its fibre network, Community Fibre is using equipment from Adtran as “strategic provider”, says Swantee. And, yes, like almost all fibre networks in Europe, it has Huawei equipment “in the network, at the customer end — in the router — and in the exchange”.
The Huawei question
The UK government has banned installation of Huawei equipment in 5G networks after the end of 2020, but this ruling does not apply to fixed fibre networks — mainly, cynics say, because there is no real competitor.
“If the government decides to ban Huawei from fixed networks we will have to [remove it],” says Swantee. “We have a dual supply, but for the UK it will be a big challenge. Huawei is a very good provider of fixed network equipment.”
Indeed, the last time I saw Swantee in the flesh was at Mobile World Congress in Barcelona a couple of years ago at a Huawei reception, when he was talking about using the vendor’s equipment for FWA at Sunrise.
“What is difficult for the industry to accept is that Huawei is a very strong provider. I have incredible respect for them.”
But what about security concerns? “It is the responsibility of the telcos to ensure networks are safe and working. If you block one provider, it doesn’t solve the problem.” But, if Huawei were to be banned, “for Community Fibre it would not be a big challenge”, he says.
We turn finally to the role of Warburg Pincus itself, a firm he joined after leaving Sunrise. “It’s one of the largest and oldest private equity funds worldwide, with $17 billion in the TMT [technology, media, telecoms] sector,” he says. “In Europe we have investments worth $4 billion so far — in companies such as Inmarsat.”
One of his colleagues in the firm is René Obermann, who is co-head of European operations. The industry will remember him as CEO of Deutsche Telekom until the end of 2013. He was notable as one of the first senior executives of Deutsche Telekom to come from outside the firm, having started his career as a telecoms entrepreneur.
Telecoms portfolio
“We want to build a portfolio in the telecoms market,” says Swantee.
How long will Warburg Pincus stay involved in Community Fibre? “We will hold this for typically a long period of time — five to seven years,” he says. During that time it is possible there will be “significant” further investments in telecoms. “It’s our ambition to have further investments in the UK and in western Europe.” Community Fibre could be just the beginning.
Timeline
1990 Various roles, Hewlett-Packard
2007 EVP Europe and mobile worldwide, Orange
2011 CEO, EE
2016 CEO, Sunrise Communications
2020 Strategic adviser, Warburg Pincus
2020 Executive chairman, Community Fibre
