Second European acquisition for Digital Colony

Digital Colony has expanded its commitment to the European market with a second infrastructure investment in six months. Following the acquisition of Digita, the owner and operator of the only nationwide tower infrastructure in Finland, Digital Colony has most recently invested in UK indoor mobile connectivity provider Stratto. 

Providing DAS and small cell networks across the UK, Stratto’s focus on providing infrastructure as a service (IaaS) and close relationships with the UK’s mobile network operators position it for continued growth as networks densify ahead of 5G rollout.

"Our investment in Stratto is an excellent first step for Digital Colony in the U.K. market as we seek to build a small cell platform and expand our European footprint," said Marc Ganzi, Managing Partner of Digital Colony. "Stratto was attractive because of the strong operational track record of its management team, its core focus and expertise and its competitive market position including relationships with the U.K. MNOs. We look forward to working closely with the management team to position Stratto as a leader in the development of 5G digital infrastructure across the U.K."

TowerXchange caught up with Richard Bourne, CEO of Stratto, for an exclusive insight into how the deal was put together and the ambitions of both Digital Colony and Stratto for European growth.

TowerXchange: Can you tell us a little more about Stratto and where you currently see yourselves fitting into the communications infrastructure ecosystem?

We’re 100% focused on providing DAS and small cell networks in the UK, unlike some other companies in the space. Our core offering includes an infrastructure as a service model with a focus on indoor connectivity to a variety of customer segments such as enterprises, healthcare, and property – including developers, owners or managers. The commercial real estate market in the UK is huge and underserved, and we primarily focus on the 200,000-800,000 square foot range of buildings in the UK. Typical examples of buildings in this target segment are those around the Bishopsgate and central areas of London plus hospitals nationwide which can be huge with no mobile phone signal. 

Our service offering is important as capacity demand is constantly growing, plus more and more buildings aim to be sustainable with Low-e glass that blocks mobile signals in the same way as concrete and necessitates the need for high quality in building mobile service. Great relationships with MNOs are key, as we’re using their spectrum to provide the service, but the prime payer is usually the end customer, via a monthly service. 

TowerXchange: Can you tell us what specifically about Stratto attracted Digital Colony to invest and why Digital Colony were your preferred investors? 

Digital Colony have been seeking out digital infrastructure investments in the UK, as part of their broader vision of creating a UK 5G digital infrastructure platform. They bring us a powerful combination of deep knowledge of telecoms and also creating and managing relationships on the property front. In turn, Digital Colony were attracted by our robust strategy and strong relationships with all of the MNOs in the UK.

TowerXchange: Can you talk to us a little about the deal structure, and how it relates to the vision of both Stratto and Digital Colony?

The fact we’re so well aligned helped us agree on a structure under which the management team and founders remain investors but Digital Colony holds the majority share. We’re all looking forward to making our shared vision a reality. 

TowerXchange: The UK market is becoming increasingly competitive in terms of Infrastructure as a Service, in small cells and DAS in particular. How do you feel Digital Colony can help Stratto to outperform their competitors in the market? 

Digital Colony’s team bring not only the capital but also long-standing relationships across digital infrastructure around the world. We have an opportunity to tap into that knowledge base, to invest in carrier-grade network architecture and scale the delivery of our premium service offering, using the latest technology to ensure we remain competitive. Robust DAS and small cells will be what we need to meet the needs of high quality in-building coverage, and we’re positioning ourselves to address the network capacity densification required by MNOs for 4G now and 5G in the not-so-distant future. 

In terms of specifics, Digital Colony’s global reach has enormous value to bring at a working level: their experience having built businesses in in-building elsewhere; their industry leading back office systems which will enable us to deliver through to customers; their expertise in active balance sheet management; support scaling businesses and know-how with commercial real estate such as agreements with landlords. All of that together allows us to expand in UK and fulfill our eventual goal of becoming a leader in providing infrastructure as a service in Europe. 

TowerXchange: Digital Colony is well known for its pioneering investments in critical future infrastructure, and these elements will become increasingly interdependent. Can you talk to us about how you see the broader UK 5G infrastructure developing? Can you share any more about the role Digital Colony plans to play in this?

Digital Colony is a firm believer in the convergence of mobile and internet infrastructure. The future of 5G depends on DAS, indoor and outdoor small cells and convergence with metro fibre, datacentres, towers and edge computing. We will be working with Digital Colony to bring all of that together. We plan to have a big role in investing in this exciting opportunity. 

TowerXchange: You mention both indoor and outdoor small cells. Do you see moving into outdoor small cells as the next step for Stratto?  

Outdoor small cells are a natural extension but there is a huge indoor opportunity still to be tapped. 

TowerXchange: Current feeling is that European MNOs will be slower to roll out 5G infrastructure than their counterparts in the USA or Asia, how do you think this will affect the value of European assets and the way that 5G rolls out in Europe? 

We know mobile data growth in UK and Europe will follow the same trends as data growth worldwide, and that will determine where things will happen. Ofcom held the UK 5G auctions in April 2018, and EE, Three, Telefonica and Vodafone are testing 5G services, but the date of a full commercial launch is yet to be published. Stratto is investing now and will be ready for 5G.

We’re sure that however this works out the operators will continue to work on densifying their networks, as we see them investing in 4G, so the opportunity is there to continue building for the 5G rollout. Stratto will use the most competitive technologies to develop the associated upgrade path to 5G and the massive increase in DAS and small cells will help to strengthen market opportunities for Stratto and Digital Colony.