S&P Global Inc. (SPGI) Earnings Call Transcript & Summary

Hello, everyone, and welcome to today's webinar. My name is Zaneta Kucerova, and I am a TMT product specialist at S&P Global Market Intelligence. It is my pleasure to moderate and speak at today's webinar on the European Digital Infrastructure Markets. This topic is of great interest to most of you. We want this to be an interactive session. Please submit your questions during the presentation or at the Q&A session at the end. Please check the widgets on your screen, in particular, the related content and the survey widgets. Finally, please take the time to fill out the short survey. We value your insights. Before I begin, please note that the activities of S&P Global Market Intelligence are independent and separate from S&P Global Ratings. S&P Global Ratings maintains separation of analytical and commercial activities. Now I would like to introduce you to today's speakers. Mohammed Hamza is a senior research analyst for Kagan, Media Research Group within S&P Global Market Intelligence. Mohammed leads the company's Western European broadband and video coverage, focusing on operating strategies, business models, TV network programming economics and emerging TV Everywhere/OTT initiatives. Natalie Colakides is a research analyst also at Kagan, Media Research Group. Natalie covers broadband, multichannel television and advertising in Southern Europe. Mai Barakat is a research analyst for the Data Center Services and Infrastructure Channel at 451 Research, a part of S&P Global Market Intelligence. Mai covers data centers in EMEA. She is based in London and has been covering mobile telecoms and 5G in Europe as an analyst within our TMT Group since 2019. And my name is Zaneta Kucerova, and I'm a TMT product specialist for EMEA at S&P Global Market Intelligence. Thank you, Mai, Natalie, Mohammed, for joining us today. Now let's start with today's agenda. In the next 45 minutes, we will discuss Europe's key digital infrastructure trends on data centers, fiber and towers. Mai will present on European data centers, growth, key markets and locations. Natalie will present on fiber deployments in Europe, state of broadband, fiber rollouts and investments. Mohammed Hamza will present on towers, deal activity, key players and trends. This now brings up to first falling questions you would like to hear what you think. "Which of these do you consider to be the most attractive digital investment assets? 1, 5G network; 2, submarine cables; three, terrestrial fiber; 4, towers; and 5, data centers. We are starting to see the results coming out now. I'm going to wait a few more seconds before closing. Okay. Let's see the results. Great. I can see that the majority of you believe that data centers represent the most attractive investment opportunity. And with this, I will hand over to our experts. Mai, over to you.

Good afternoon, everyone. So as Zaneta mentioned my name is Mai, and I look at the data center market, services and infrastructure for Europe, Middle East and Africa. And today, I'm going to be giving an overview on the data center trends in Europe and what we see now and what we forecast to see over the next couple of years. Next slide, please. I'll start off by giving a global overview on what we believe to be happening in the data center industry in Europe, a bit more of a deep dive into what the top European markets are? And then finally, I'll be discussing a little bit more what the key data center locations are in Europe and how those are linked to fiber routes. Next slide, please. If we look at Europe on a global perspective, we can see that it's growing faster than North America, but not as fast as the Asia Pacific region. We forecast that between 2021 and '26 to have a CAGR of around 9% for Europe. And whilst that has kind of come about as a result of the global pandemic and pushing forward digitalization due to workforce is moving to working from home, it's something that has always been there, and we have always predicted it to be that due to the continuing increase of demand from hyperscalers in the region. Next slide, please. So it's -- to no surprise that London, Frankfurt, Amsterdam and Paris are the top markets in Europe. 451 Research estimates that there's currently about 1,700 multi-tenant data center providers across Europe, and they offer total supply approximately 33 million square feet. And the flat market, so those top 4 markets are the [Indiscernible] data center markets, and we predict they will continue to see growth. And as previously mentioned, it's mainly being driven by the hyperscale demand. And that hyperscale demand is now also leading to expansion in major secondary locations across Europe, not to be Dublin, Milan, Zurich, Madrid and Warsaw. Can you take the next slide, please. And if we then have a bit more of an insight into who are the top providers in Europe, we can see that 3 of the top 10 providers that actually make up more than 25% of market share or real estate investment trends. So we have investment trust -- sorry. So we have Digital Realty, Equinix, Entity Global data centers. And we forecast that they will continue to hold the largest -- the large part of the pie chart due to continued expansion, investments in Europe over the next few years by the 3 of them. Next Slide, please. So obviously, as the largest data center market in Europe, I'm going to be doing a bit more of a focus on London. London remains one of the most important types of activities for global data center markets. And it's kind of almost like a bellwether, supply and demand trends across Europe despite the impact of COVID-19 on construction timelines and the continuing rise of European data center locations such as Frankfurt, Amsterdam and Paris. It's the third largest colocation market in the world in terms of megawatts behind only Northern Virginia and Beijing. And it at the moment is operating more than 80% utilization, which is typical of the flat markets, so we have seen average utilization rates, rise in recent years, and we expect it to remain near this level over the next 2 years. The interconnection with network services and cloud locally and internationally is what makes London a key hub for data center services. The city is considered to be a landing point from which to deliver services to the rest of Europe and this offers a favorable business environment, particularly for U.S. organizations. Despite market challenges such as obtaining power and land along with COVID-19 lockdowns impacting timelines, supply in London has continued to grow with over 770,000 square feet and 134 megawatts projected to come online by the end of this year. And while the pandemic has negatively affected construction timelines in some cases, it has also had an important role in the acceleration of cloud adoption. London has always been one of the most technologically advanced markets in Europe when it comes to cloud and new technologies. The strong take-up of AI and data analytics as well as the growing use of IoT services, paid away for an increase in demand for higher density data center space, which has driven the expansion that we can see in London's data center industry. And we expect it to continue to accelerate over the next few years. And although it's getting trickier to find land and power, it will continue to grow, but what we may see is the market may end up extending further outside of London to new areas, in particular, East of the city. We expect the cloud and managed service providers will continue to expand in our space. And also on looking to build or kind of on their own sites, they're likely to continue to use local wholesale suppliers for much of their needs due to the time it takes to clean land, power and permits in London and the need for speed to markets when it comes to data centers. If we look at what the main hubs, I guess, in London are, we can see that they were in Docklands, Central London and M25, including Slough, which make up today's metro markets in London. Traffic between data centers is also growing, and more providers are adding interconnect services across metro Ethernet routes, adding to that appeal of outer London locations. In recent years, clusters of data centers, just inside or outside the London's M25 orbital have contributed to most of the market growth that we see. And it's predominantly to the fact that these auto locations, they allow for a much larger canvas build, access to power and lower property rates. And because these sites are often previously used by the commercial industry, they tend to often sit along highly connected fiber and power corridors. Next slide, please. So as we have the obvious flat markets, where we're seeing the larger data center industry growth, we are seeing more and more growth in other locations, such as Marseille, Bordeaux, Milan and subsea fibers are becoming more important in the growth that we're seeing within those locations. So I'm kind of going to do just quick spotlight on that thing. Marseille's prime location is on France's southern Mediterranean coast and it's kind of placed at the crossroads of connectivity for subsea cables. These are vital, particularly in developing regions since not only do they bring content close to its consumers, but they also help to bring down costs and increase overall network efficiency, thanks to reduce latency. And there is key factor when considering the increase in supply chain costs in the data center industry and also the importance of efficiency and trying to achieve sustainability goals. Marseilles is a landing point for 10s of marine systems. There are also others that connect locally, but these are through branch lines of terrestrial links. The longest ones I've seen is 4 and 5. And when combined, those 2 systems cover more than 23,600 miles, connecting Europe to Singapore via various landing points across the Gulf and Southern Asia. There are 7 new systems currently in developmental stages that plans to land in Marseille over the next few years, 5 of which will land in Marseille and 2 will be connected by terrestrial fiber. These systems include 2 that represent the longest underwater fiber networks currently being laid. So we have 2 Africa, which was announced in May, and it's designed to be the first cable system to serve all of Africa. It's a 23,000-mile long network, which will have 21 landing points in 16 countries and is interconnecting Africa and the Middle East to Europe. It has a design capacity of up to 180 terabits per second on key segments. And when it lights up in 2023, '24, the system will deliver its claim to more than the total combined capacity of all the subsea cables currently serving Africa. So this influx of new connectivity that Marseille has seen in recent years, and obviously, there's more to come. It's turned the city into a digital tie for carriers and service providers that are all supported by data centers. And it's turned a bit of a focus on edge in Marseille. We are expecting as a result of this, to see almost 50,600 square feet of supply to come online by the end of 2022 in Marseille. Next slide, please. which I believe is a polling question. So I mentioned sort of how Marseille being looked at as kind of an option for edge. So I wanted to -- would be interesting to see is where do you see the strongest use cases for edge. Is it autonomous vehicles, smart cities, manufacturing, telemedicine, AI, augmented reality or financial institutions. So I'll give you a few seconds to reply. And you don't have to answer just one, you can answer multiple. We can see the results please. Interesting. So it's autonomous DSOs, smart cities and manufacturing, which make up the majority of what we believe to be use cases. Great. And with that, I'm going to pass on now to Natalie Colakides, who will be speaking in more detail about fiber trends in Europe.

Thanks, Mai, and hello, everyone. Thank you for joining. So switching gears now, we're going to look at the current state of broadband in Western Europe and more specifically fiber. We will take a closer look at the development of broadband access across the region, the progress of fiber and finally, the potential it provides that has led to extensive external investments mostly from private equities. Next slide, please. So starting off, we've seen broadband penetration in Western Europe increased steadily over the past 10 years, and we expect it to reach almost 90% by 2030. So as the market becomes more saturated and overall broadband penetration reaches 100%, broadband subscriber growth will naturally slow down. Still, broadband revenues continue to rise as consumers will seek faster and more reliable Internet. So as we can see on the graph on the right, multichannel TV revenues have become stagnant. So for telcos, fixed service revenues are expected to be driven by growth in broadband revenues. We have also seen increasingly -- we have also seen consumers increasingly in trying to take up higher speed broadband subscriptions, even while paying a premium, which could be EUR 10 to EUR 15 additionally per month. Now in the past 3 years alone, we have seen take-up for broadband subscriptions at or above 100 Mbps, jumped from 36% in 2018 to almost 50% in 2020. In more advanced markets such as Sweden and Spain, high-speed Internet take-up reaches over 80% today. But in many markets, this shift has accelerated in just the past couple of years due to both an increase in demand and supply. In France, for example, high-speed subscriptions jumped from 21% in 2018 to 38% in 2020. Next slide, please. So the region is dominated by 3 technologies, DSL, cable and fiber. Looking at them more closely, we can see that out of the 3, fiber is the only one whose penetration continues to rise. Now the majority of broadband accesses are still controlled by DSL. But by 2026, we expect fiber to become the leading platform. Even cable has begun to fall slowly while both cable and fiber are gigabit-capable technologies, many cablers, including NOS and Vodafone in Portugal or more notably, Virgin Media O2 in the U.K. have sought to expand their networks with fiber and gradually move away from cable. Virgin Media O2 even announced that it aims at upgrading all of its lines with fiber to the premises or FTTP by 2029 and already has a 5-year GBP 10 billion investment plan for fiber and 5G. Now on the graphic on the right, we can see fiber share of households across 16 markets. And you can see there that there is still a wide spread in terms of where each market is at and where they're forecasted to be based on their current rollout plans. Now yes, Sweden and Norway have been ahead of the curve for a while, so are Spain and Portugal, who introduced government programs early on, especially supporting reach into rural areas. France, which now aims to reach nationwide FTTH by 2025, regulators have driven their operators to commit to ambitious fiber plans which in turn led to new partnerships and investments in the market, hence, the high rate of rollouts. But what we can also see is that in some of the region's biggest market, there's been a slow development in terms of fiber rollout, including Germany, the U.K. and Italy, where often the incumbents have relied on DSL upgrades focusing on fiber to the cabinet rather than fiber to the home. Now in these markets, the lack of government regulation and funding incentives have deterred major operators from investing in FTTH and expanding the networks beyond major urban areas since the costs associated with these build-outs in remote regions remains so high, and the return can take longer to see. In Italy, for example, Italy has long struggled with fiber build-out. There was limited to no public funding to serve the so-called white areas, which are the more rural ones, and the high cost of building out fiber deterred operators from investing there. Now at the same time, major urban areas run the risk of overbuild while the saga of Telecom Italia and Open Fiber competing with each other drags on. Now the recently announced deal that they have could help with the expansion of the network and limit their competition. But there is still a significant amount of investment that is needed that may attract new partners in the near future. Now similarly, in the U.K. there is -- there were no set goals on a national or operator level, which has led to the lack of coordination and let the market fall behind in terms of fiber rollout. This did give way to the creation of over 100 smaller networks in the country who are all building their own fiber networks, indicating that there is a large appetite for investment in the market, but with no regulation, this means that there is still a limited reach, as all of these networks overlap with each other and focus on urban areas and not have any wholesale or sharing agreements. In fact, if we sum up just the current FTTH reach of 4 operators, Openreach, CityFibre, Hyperoptic and Virgin Media FTTH only, 9.3 million commercial and private premises should have access to FTTH in the U.K., which could have translated to almost a 30% penetration. And that would be -- sorry, sorry. Change the slide -- and that will be -- I got lost with the slide, excuse me. We're still talking about the U.K. Okay. So we'll switch to the next slide. So just taking a look here in the slide. We are looking at the operator where each operator stands in terms of FTTH reach. Now an interesting case here is Germany, where funding and regulations have been brought in vague. So Deutsche Telekom has built a 650,000 kilometer fiber network, but the FTTH reach is only at 3.4 million homes, which translates to about an 8% penetration in the market. Now compare that with Telefonica in Spain, where they have a 250-kilometer of fiber, and that has enabled 26 million premises, which is over 80% of the market. In the last couple of years, many of the operators that we see have found investors that have helped them increase FTTH rollout goes that or bring their timelines forward by 3 to 5 years in order to meet an increased demand. So if we move now to the next slide. Here, we can see the change where we can see the operator goals in the coming years. Now Deutsche Telekom, which partnered with IFM Global Infrastructure in 2021, now aims to reach 12 million premises by 2028, 4 million of which came through this investment deal. Proximus, which currently have 813,000 premises, aims to reach 4.2 million by 2028, adding 1.5 million premises through its partnership with EQT Infrastructure. Here in Ireland also has established this joint venture with InfraVia, which will allow the company to accelerate build out by 50,000 additional connections annuity. So we can see that for all of these goals to succeed, there is a significant amount of investment required, and we have seen many more operators seek new partners for their infrastructure build-out. Next slide, please. So here, we can see a time line of investors entering the infrastructure business. There have been cases where investors have bought into smaller ISPs such as Goldman Sachs Consortium acquiring CityFibre in 2018 and KKR acquiring Hyperoptic in 2019 or more recently, MasMovil, but what we have seen more is an increasing number of operators, separate their infrastructure business from their retail business, creating new joint ventures. Since the cost of build-out for fiber, it's what lower than, say, 5 or 10 years ago is still significant, especially in markets where fiber penetration is still low. There is a high pressure on revenues and high cost and this pushed more telcos to seek partners after often private equities and infrastructure specialists. Bringing in these investors has brought a significant influx of funds that have accelerated fiber goals and network build-outs. There have been a few equities that have invested in multiple markets. Just to name one Alliance Capital Partners has already partnered with Altice in France, a local operator in Austria, Telefonica, and Germany and in all of those cases, acquiring majority share in this new infrastructure entity. We've also seen multiple investments taking place in Germany since the end of 2020. And moving on to the next slide into 2021. So Morgan Stanley Infrastructure Alliance Capital InfraVia have all established partnerships in the market. For investors, the current low fiber penetration provides a significant growth opportunity in one of the largest markets in Europe, and fiber provides a long-term and stable investment on top of an attractive ESG opportunity. So with that, I'll pass it along to Mohammed to expand.

Thank you, Nat. And if we can move to the next slide, please. Hello, everyone. So I am going to be continuing with the fiber theme briefly before turning full circle on towers to link us back to the digital infrastructure themes that we've discussed today. So from an investment perspective, the opportunity in digital infrastructure really goes beyond what is immediately obvious, and that goes for both fixed and mobile assets, fiber or 5G given the amount of investment required to build out physical infrastructure, and this is really the big theme here for fiber and towers. The efficiency of these networks plays a significant role in softening that burden while also providing for opportunities. So sustainability in green credentials as well as making better use of existing infrastructure, such as towers, for instance, will help to achieve environmental goals which is really increasingly becoming a key consideration for investors. But it also helps to optimize those assets. And that's really a key theme, considering how hypercompetitive the European markets are fragmented as well. This optimization really goes hand-in-hand with the consolidation, which is why we're seeing continued M&A activities, especially around digital infrastructure and particularly the passive elements at this stage. Next, just looking at the slide actually. So just take a moment to consider some of these optimization opportunities in relation to fiber and ESG. Just as some background to this, we conducted a survey with 101 telecoms and 42 cable professionals across the globe last year. And only 19% of those respondents actually said that environmental impact was not a driver in the decision to upgrade to fiber. And 35% of those respondents were European telcos, 38% were cable operators, still technology alone is not enough to achieve environmental goals and governments and companies still have some way to go before essentially being able to knit together a more holistic approach, and you can see some of those key elements here on this slide. Copper networks being decommissioned, as fiber networks gathered pace. As Natalie explained earlier, we have governments also playing a critical role. A recent example in Germany, where the Federal Parliament passed a new act on corporate due diligence, obligations and that was in June 2021. And the aim there really is to minimize negative social and environmental impact of activities that are associated with the company's supply chains, and that's due to us in 2023. On emissions, efficiency and supply lines, there are numerous initiatives as well. I've highlighted a couple here. Nordic operator, Telia is very involved in their 2020 annual report as much as 86% of the company's value chain emissions were generated in the supply chain. And they also said that they are using their influence essentially in the ecosystem to help instill low-carbon operations and manufacturing and promote size-based targets. And so at year-end, supply is representing 16% of the company's settled supply chain emissions that actually set science-based targets. But there's also momentum here for sustainable technology beyond the individual action in Europe. As members of GIGAEurope here that you can see, including —Liberty Global and Vodafone, founded the European Green Digital Coalition in March 2021. Now their plans include continued improvement in networks and data centers, developing and rolling out green digital technologies that not only provide measurable energy efficiency to cross sector kind of net positive impact, beyond that as well, and that includes the science-based targets that I mentioned in the Telia segment. So the priority sectors for this group include energy, transport, manufacturing, agriculture and construction. The next slide, you'll see how here -- briefly, how much more efficient fiber is. So take a look at the graph on the left to see how these different fixed broadband technologies compare. The first 2 sections of this chart, you'll see how these platforms compare when it comes to the consumption of energy. And this was from a study conducted in 2021 by Prysmian Group, and they're in Italian telecoms and energy cabling manufacturer. And so we use this data and if you look at the numbers at the bottom to compare how much more efficient these platforms were in comparison. So looking at gigabit passive optical networks or GPON, for short, you can see an 8.9% improvement in total energy consumption, and that's megawatt hours per year, when compared with VDSL vectoring for instance, or 36.7% improvement on cable. And the advantage of GPON from an energy efficiency perspective is that they are passive networks with no optical elements essentially between the central office and the end customer. Now interestingly, fiber to the home point-to-point as opposed to the point-to-multipoint structure you see in GPON to provide single rather than a shared fiber strand to each premises is 2.6% less efficient than VDSL. So that's interesting. But ultimately, FTTH point-to-point costs are higher, but they support much higher performance in the future as well as greater product differentiation and as well as kind of elements like line upgrade capabilities to individuals. Now related to this on the right, some points from Belgium's incumbent telco Proximus. And we've managed to pull some interesting data around this actually. They've highlighted fibers environmental credentials, noting that essentially data transmission over fiber uses up 12x less energy than copper. On top of that, firm pointed out, fiber is made of silicon dioxide with silicon being the second most abundant element on earth after oxygen. So the exploitation here, that element is not harmful to the environment. On top of that as well, we see Proximus saying that the use in production of 2 kilograms of copper wire results in the emission of 1,000 kilograms of CO2 compared with fibers mega 0.06 kilograms. So a massive difference there. And it's the same story for 5G, which is up to 90% more efficient than 4G in terms of energy consumption per unit of traffic. And that's according to trials conducted by Telefonica and Ericsson. Now additional benefit here to shutting down corporate networks. And this kind of goes back to the kind of not so obvious elements of the transition to fiber is recycling. So Proximus said its decommissioning of copper creates a stockpile of 500 tonnes of copper each year and that the COMEX average price for 2021, this comes up to an annual value of $4.7 million. And that's the copper that's recovered from the ground during fiber installation and other assigned works as well, both our side and inside buildings. Our next slide, please. Now on the fixed networks, the clearest short-term benefit for operators in terms of both ESG and revenue will be retirement of copper networks in Europe, and cables eventual shift to full fiber, as we heard earlier. Now time lines for copper network shutdowns are still not universally transparent in Europe given that much of that relies on the transition to fiber and third-party network carriers shift to the new networks and those contract commitments there. I've put together a map here and that shows all the countries in Western Europe where mainly incumbent players have laid out clear plans for shutting down copper. The countries in gray have already started the process, but with no formal or final target date. The countries in different shades of red that you see represent those with shutdown date. So countries that are not shown on the map for Western Europe have not disclosed any details as yet. Now before we move on to Towers, a quick parting question on the next slide. So when do you think, well, European tower owners begin to include edge computing at tower locations. I'll give you a few seconds to respond. Let's take a look at some of the responses that have come in. So 50% of people believe this is already happening. This year, 13.6%, 1 to 3 players, 23% or just under 3 or more years, 13.6%. So this is the discrepancy there, I think, is down to the fact that there's different players at different stages. And I think in Europe, there's still kind of an exploration and research and development element to this edge computing, but it is definitely starting to happen. So thank you for those responses. And moving on to the next slide, please. So as clear as fiber benefits are, so too is the massive, expected growth in data consumption, which increases energy use by supporting even more devices and think of new services like IoT, increasing demand for data centers, among other factors and potentially offsetting the gains that we see made in network efficiency. And this is bringing us to the final part of the presentation focusing on tariffs and where we've seen a lot of consolidation in recent years at much higher multiples than for their mobile network operators themselves, in fact, both in the U.S. and Europe. In Europe, the situation actually is now at a point where much of the passive infrastructure has been sold off, leaving operators and tower companies to pursue the next phase of opportunity in the active infrastructure elements such as the radio access network and in the edge. And all of this really goes back to the expected growth of data use, when that's going to happen, how soon it's going to happen and how big it's going to be, and elements within that, such as real-time processing. So operators will continue to roll out new towers to cover white spots and holes in the network essentially to support the growing bandwidth needs in cities and for 5G and even existing technology. But before we take a look at some of this, let's take a look at the next slide. The image here is a heat map, essentially showing the level of activity in power sales across the globe. So 173 deals across countries in the last decade pre-2020. So you can see the deal activity concentrated in the Americas and Europe. And a reminder that these are, again, pre-2020 deals. So there's been some activity, obviously, since then. Now in the next slide, you can see more detail on the actual number of deals and their value. So there's 2 data points here. One is the average weighted value per tower for these deals in the blue shaded boxes and 2 is the number of deals in the white boxes where the number of deals is not shown. That means only one deal took place essentially. But you can see those valuations are particularly high in the U.S., in Europe, generally. There are some -- there's a few kind of outliers like Ghana in there. But generally, it's Europe and the America where the highest values are. And that's not surprising given the value of real estate, for instance. Now taking a look at the next slide, please. So we're going to dig a bit deeper into the edge and what it is and what the trends are here. So -- just an overview quickly, edge reduces 5G latency by adding service to the cache internet content at the base of towers. So that brings the cloud to just several yards below the antenna essentially, not blocks or miles away. And that helps operators achieve lower transport costs by keeping the traffic local. Now think of that opportunity here around enterprise, private 5G networks, the required real-time processing for some of these institutions or enterprises, say, universities, malls, stadiums. And many traditional towers now have room to spare at the bottom of the actual structure to add essentially edge-server fridges. Now carrier-neutral facilities what we call towers are complementary to the build out of the edge. And that business model can actually resemble the rental model that tower company is already employed. In Europe, the biggest players are Cellnex, biggest, I should say, independent tower operators are Cellnex, followed by Vantage Towers. But I'm going to take a look at the 3 largest tower companies in the U.S. instead because they've set the tone for the industry and they are a little bit further ahead as well. And the major U.S. tower companies, you see here, they see an opportunity in edge computing, obviously, but their views of when to engage differ. Now carrier-neutral facilities that house network and cloud peering are generally viewed favorably because they can create an ecosystem, an attractive one at that. And that ecosystem is important to ensure that they can provide infrastructure that can be scaled is fast and it's flexible. So specifically looking at American Tower, they've decided to engage now before 5G is carrying more essentially mission-critical data. So that requires latency reductions in many areas of network. The company sees a hub and spoke model as the edge evolves. So where is existing tower sites can service locations for edge data facilities. And these connect back to the core data centers and major metros, as well as the metro data locations in Tier 2 and 3 markets. Its unit is called CoreSite. It operates 25 data centers across the U.S. in a major kind of metropolitan areas and with access to 21 cloud on-ramps at this point. And they are operating as a data center campus in key U.S. markets. Going forward, American Tower expects to see essentially an increasing demand for its interconnected portfolio. And that should bring about new opportunities to selectively deploy projects. So 5G is expected to kind of unlock a lot of new capabilities that require lower latency. And as this accelerates, it will drive more demand for the company's data center campuses and that pushes storage and compute requirements further out to the network edge. American Tower said that combining the differentiated data center portfolio, communication service provider elements and network operator relationships with the distributed U.S. macro tower portfolio, along with their long-standing MVNO partnerships, these all significantly enhance the option to create value as the edge evolves. Meanwhile, Crown Castle believes there is an opportunity around edge data centers, and it's positioned itself quite a few years ago with its investment in Vapor to take advantage of that. Now they said that if data traffic gets to the point where edge data centers become more meaningful component of the overall wires network, there's a significant upside in case in small cells and the fiber investment. And ultimately, edge data centers are necessary and are critical components for the wireless networks, and that's what they think. So to date, we've also seen SBA investing in 2 regional data centers, one tower based data center and supporting essentially a mobile edge computing initiative. They're focused mainly on kind of the research development elements at the moment to better understand what the best business models are going to be to offer from these existing sites? I think a lot of the questions around towers and the edges still resolve -- revolve around whether the edge proves to be essentially more significant and more important as a cost saving mechanism than a revenue-generating one. Just as an example, the sale of towers by telcos and leasing those tower sites out gives them up to 60% to 70% cost saving on OpEx in the first year. So there's a lot of cost saving elements attached to this. And think of it this way. It's ultimately about pushing businesses and their applications to the network and not vice versa. So ultimately, what we're seeing is all of this digital infrastructure ties into each other, whether it's the data centers, the tower sites, the fiber that you need, the power supplies, all of these are critical and are becoming increasingly intertwined as well. So with that, we can conclude and go to the questions. Thank you.

Thank you, speakers. That was excellent, and this ends our presentation. Now let's open the floor for questions. We will extend by a few minutes. So please use the Q&A widgets under console to submit your questions. We won't be able to go through all the questions left today, but we'll go through the most frequently asked ones. And if we don't get to your questions today, we will follow up with you directly within the next 24 hours.

So let's take a look at some of the questions. So the first one, "do you expect Brexit to have impact on the London data center market over time?" Mai, would you like to take this one?

Sure. Well, historically, so far, Brexit has done little to dampen the data center demand for London, with many actually doubling the data center capacity in the city. So we don't expect to see anything different in the next couple of years, and what's more likely going to happen, and what has happened is that there'll be continued expansion in the London data center industry, but then there will also be sort of a secondary data center location in Europe somewhere to complement it. So in short, no, we don't see that it will affect demand in London.

Thank you, Mai. The next question is, "what role do nonfiber broadband technologies play." Natalie, you might want to answer this one?

Yes, I can take this one. So we talked a little bit about cable and how cablers are moving away from DocSys and expanding their networks into fiber. Now other technologies such as satellite and fixed wireless while they're not gigabit capable, they can't offer high-speed broadband. I mean we've seen satellite grow, especially with the launch of StarLink, which even though it's more expensive, it can help cover more isolated areas without the cost of running cables plus actually StarLink even announced a couple of days ago that customers can access their broadband subscription in different locations. So it's adding this new mobility factor. And then fixed wireless can help complement fiber to the home since -- by basically alleviating the burden of that last-mile connection, which carries such a high cost.

Excellent. Thank you. So we did cover a lot today. So if you have any follow-up questions, please use the Q&A widget, and we will be glad to assist. This session has been recorded, and you will receive a replay link tomorrow, so you can access it on demand at your convenience. And also, when you close this webinar, you will be rooted to our regulation form. We'd love to hear your feedback, so please take a few minutes to fill this in. So all that is left to say is thank you, Mai, Natalie, Mohammed for presenting today, and thank you all for taking the time attending. We look forward to seeing you again soon. And thank you, and goodbye.