Global mandate for investing in fibre and data centres
Digital 9 Infrastructure has raised hundreds of millions and has started its investment plan by buying Aqua Comms. But there are other opportunities in the pipeline, Thor Johnsen tells Alan Burkitt-Gray
Subsea cable operator Aqua Comms is now owned by Digital 9 Infrastructure, a new company that has successfully raised £300 million in a recent share offering.
The subsea operator, previously owned by a family investment company, will retain its management team after the acquisition, which was completed on
April 1, hours before the Easter holiday closed down most of Europe. Digital 9 gave the purchase price for Dublin-based Aqua Comms as $215 million.
Digital 9, which completed its initial public offering (IPO) a week before the takeover, is planning to invest in a number of other infrastructure companies, according to Thor Johnsen, head of the digital infrastructure team at Triple Point Investment Management, which set up the company.
In early June, Digital 9 added £100 million to its resources with a new issue of shares, “to acquire further assets in line with the company’s investment objective”.
And then, a few days later, it placed another £175 million worth of shares.
“We are thrilled with the results of the fund-raise,” says Johnsen. “Since coming to market, the team has established a significant pipeline of digital infrastructure assets which will deliver a reliable, functioning internet. To see such strong backing both from investors who joined us at IPO and new investors who joined us at this fund-raise puts us in a great position for the months and years ahead.”
The process “reaffirms [Digital 9’s] commitment to improving global connectivity in an environmentally sustainable manner, while delivering sustainable income and capital growth for our investors”.
One of the companies on the list for future investment is Ontix, which builds carrier-neutral small-cell infrastructure. It is owned by the same family investment organisation that previously owned Aqua Comms. There are also opportunities working with “councils, mobile network operators and enterprises”, Johnsen tells me.
He is also looking at fibre networks, largely for rural communities, as well as data centres, which he wants to be carbon-neutral.
Digital 9 “has a global mandate”, says Johnsen. “We are looking at things in Asia but the bulk in the near term are in Europe and the US.” The company has told investors it is aiming to complete deals in six to 12 months, “but we hope sooner than that”.
Aqua Comms, the first company in the Digital 9 portfolio, owns and operates two transatlantic cables, AEC-1 and AEC-2, plus CeltixConnect-1. In spite of the change of shareholder, Aqua Comms will continue to operate as a privately owned company, though wholly owned by what is now a publicly traded fund.
Johnsen says: “We have collectively experienced the digital transformation in our society over the last few decades – and particularly in the last 12 months – and we believe we are at the dawn of a broader transformation. D9 is focused on global investment into the critical infrastructure driving this unstoppable force of change, and D9 is therefore delighted to complete its acquisition of Aqua Comms as the initial cornerstone investment for this new fund.”
So, a fund that is investing in digital infrastructure? That invites comparisons with Marc Ganzi’s organisation, Colony Capital, which in June announced a rebrand as DigitalBridge. Is that an accurate view, I ask Johnsen? “We have like-minded visions but I would be loath to put us in the same sentence, as we’re so small,” he says.
DigitalBridge, as it now is (Ganzi’s original company was Digital Bridge, with a space), has just unloaded $2.7 billion worth of non-digital assets under management as the latest move to focus on the digital world. That alone is 10 times what Digital 9 raised in its London flotation.
There is an intriguing connection, though. Last year Ganzi’s operation completed its takeover of Zayo in a $14.3 billion acquisition that was a 50-50 joint venture with EQT, a Swedish investment fund. And Jack Waters, former COO of Zayo, chairs Digital 9. The operation has other telecoms expertise on its board. Non-executive director Lisa Harrington spent 10 years at BT, including a time as managing director of transformation, followed by more than two years at BT Wholesale as CIO and managing director of customer operations.
According to her LinkedIn entry – though not the profile on Digital 9’s website – she is now interim managing director of infrastructure at Hyperoptic, a company that is building full-fibre urban networks in the UK, delivering up to 1 Gbps. But that doesn’t mean Hyperoptic is on Digital 9’s acquisition list, Johnsen says.
Aqua Comms board
Johnsen, who has spent two decades as a banker, has been on the Aqua Comms board since 2015. “I was working for the family office,” he says, and he realised there were wider digital investment opportunities around. “We didn’t have the funding depth, and we needed a broader investment portfolio.” About 18 months ago he started talking to different infrastructure funds, “looking at how to make it work, and I got to know the guys at Triple Point”.
London-based Triple Point invests in a range of activities – social housing, energy and leasing as well as digital infrastructure. And there’s a start-up element to the fund. “I realised this would be a good home for these assets,” says Johnsen, who lives in the countryside on the western edge of London with his family – four children under 10.
Johnsen now works for Digital 9, the infrastructure fund set up by Triple Point, and for Aqua Comms: no longer for the family trust that previously had the assets.
“My background is all in infrastructure. I’ve been doing infrastructure since it was Macquarie, Babcock and ourselves,” he says, naming a couple of the largest investors. Now, “there is a pipeline of assets” that Digital 9 has its eye on. “It’s early days,” he says, though the timetable he gives shows plans for a rapid expansion.
Most of the money will go into existing operations, but up to 20% can be spent on developments. What sort? “Look at data centres and look at the development risk,” Johnsen says. In the data centre industry, “there is an ability to place your bets wrong. We’ve seen a shift to the cloud, with hyperscalers.” Development risk is an issue that he’s thought carefully about: some organisations hide development risk as an asset, he says. “We wanted to be disciplined. We call development risk development risk. We take a very disciplined approach.”
Searching for data centres
So what is Digital 9’s data centre approach? “We’re not just looking to go up into New York City and build a massive capacity with cheap land and cheap power,” says Johnsen.
“Our data centre approach is [to look at] a very global network that’s architecture-driven. We want to know what the hyperscalers are doing and how we want to work with them.”
Johnsen confirms that Ontix “will go into the fund in the next six months”, but acknowledges that “it is small and there are other priorities”. Though an agreement has yet to be done over the acquisition of Ontix, “we have first refusal”, Johnsen says. “It’s a good fit.”
Earlier this year, Ontix started installing its systems to improve coverage in six street markets in the Westminster, the area of London that includes Trafalgar Square and the Houses of Parliament. This follows a 10-year partnership agreed with Westminster City Council in 2018, under which Ontix has been rolling out next-generation wireless services via street furniture across the borough, including its new Metrohaul neutral host backhaul network in Trafalgar Square, supporting 4G, 5G, Wifi, broadband and smart city technologies.
Back to data centres. Are there any in the pipeline? “We have some offers out there. I hope announcements will be forthcoming,” responds Johnsen. When? Six months, he suggests.
And fibre? “I really like fibre,” says Johnsen. “I’m not sure I’m a big fan of metro networks. But there are areas that are underserved.” In metro areas, pricing is calculated on the expectation of significant growth and, “as competition has risen, that growth will be harder to achieve”. That implies he’s interested in largely rural, or at least suburban areas. And he’d like to be involved in consolidation of fibre assets, he says.
Why the figure nine in Digital 9? This, says Johnsen, is because he is enthusiastic about environmental, social and governance issues – “though the term is over-used and under-respected,” he smiles. “I grew up investing in utilities, where you take care of your supply chain and your customers.” But the nine? That’s because of the United Nations Sustainable Development Goals – number nine of the 17 is “industry, innovation and infrastructure”, he recalls. “How do we get more people communicating? Not just in rural communities, but it’s also about creating better networks. I would feel I’ve failed if we don’t do something to address the digital divide.”
One of the other key concerns of Johnsen and the Digital 9 team is the environment. He wants a genuine zero-carbon footprint for data centres, “and that doesn’t mean just buying offsets,” he adds. “This is very much a global mandate.”
So what is Johnsen like as an investor? “Very hands-on,” he says. “But once a deal is done, our job is predominantly HR, finding the best people. Just get the best people, even if it means slower growth.”
Aqua Comms, the original investment, will continue to be a focus of attention for subsea plans, with Nigel Bayliff in charge as CEO – and he’s also on the board of Ontix.
“And we want the same thing on the data centre side, and on terrestrial fibre too,” says Johnsen. Which means he’s on the lookout for the Bayliff of data centres and another Bayliff of terrestrial fibre. That is quite some ask.