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Macquarie Group Is Set to Shake Up the Digital Infrastructure Market

A few months ago, I reported on the broader market of which telecommunications infrastructure is a part. I mentioned data centers, cloud computing and data analytics (big data). All together, we can perhaps best call this digital infrastructure. While the importance of this merged set of infrastructures will benefit all economies and societies, I recently focused on regional developments as basically every region and every mid-size town will need to have a digital hub for local computing workloads and storage.

Just looking at recent political battles within the Australian Coalition Government, climate change and remediating measures. The Government agrees that this will very much depend on the availability of the right technology tools. Agriculture will be severely affected by climate change and they will therefore depend to a large extent on the availability of a range of technologies.

When I went on my recent Queensland outback trip, I was amazed at the level of sophistication of the farmers here and their understanding of the problems and the preparations they are taking. So, it is no wonder that they are screaming for better digital. Linking the need for digital infrastructure to address the effects of climate change on the agriculture section would be a smart government policy that could overcome the current political divide between the Liberal and the National Party.

In another article, I also mentioned the work that Vocus has done over the last decade in relation to fibreoptic infrastructure in relation to regional data centers. The company has 21,000 kilometers of fiberoptic infrastructure, of which a large part is in regional Australia. In all, this network connects 5,000 buildings. Furthermore, they have more than 100 data centers across the country.

So it didn’t come as a surprise that investment giant, Macquarie Infrastructure and Real Assets (MIRA)—the world’s largest infrastructure manager—is showing interest in buying Vocus for the above-mentioned digital infrastructure opportunities.

MIRA’s focus is on the future of digital infrastructure, where it sees opportunities based on the enormous increase in data usage. Around the world, the pandemic has seen a skyrocketing in working from home, e-education, teleshopping, e-entertainment and telehealth resulting in massive increases in data usage. It is safe to bet that there will not be a way back to the situation pre-COVID-19.

Many of these new services will only continue to grow. All of this will require a significant increase in decentralized in-country ICT capacity for computing workloads and storage. MIRA’s view on this matches exactly what both cities and regional towns will require and the infrastructure that Vocus has in place.

MIRA is looking at data centers and their connectivity to create international and national hyperscale data center networks.

If we think their strategy through a bit further, then we also can take into account Telstra’s restructuring as we discussed here. They will split into three different companies: fixed infrastructure, mobile towers and services. In this context, the two infrastructure companies are relevant.

This also shows the opportunities for Telstra to build new business models around their infrastructure companies—no longer vertical integrated lock-in solutions but a far more flexible use of their various assets. It is just fascinating to think how all of this will pan out as we will see increased basic utilities-based infrastructure competition in this digital marketplace, potentially between MIRA, Telstra and NBN Co.

Only a few days later, Brisbane-based star entrepreneur Bevan Slattery revealed an audacious plan to build a 20,000+ kilometer, $1.5 billion national fiber network. Dubbed HyperOne, it would support industries such as cloud computing, datacentres, environmental sciences, space vehicle launch, aerospace, satellite and defense projects. It would also provide transmission to local distribution networks such as the NBN and many mobile operators.

MIRA already plays in many of these markets on an international scale and has extensive experience in these areas, has very strong ICT infrastructure buying power as well as very deep pockets.

A rather unknown development in all of this, but potentially favoring large international infrastructure owners, is what is going to happen with the big digital companies (such as Google, Facebook and Amazon). As I mentioned in this analysis, there is significant uncertainty about their future with governments around the world adamant about limiting the monopolistic power of these companies.

These companies also have massive digital assets. One of the possibilities is that the companies will divest—voluntarily or otherwise—and companies such as MIRA could well become involved in such developments. The digital platforms will most likely move in a more neutral direction, and at that stage, it becomes a utility. Companies such as MIRA would be more than ready to tap into the new opportunities that will arise from such developments.

May you live in interesting times.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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