Evaluating an opportunity to invest in a transatlantic submarine cable

The problem

The Ireland Strategic Investment Fund (ISIF) asked Analysys Mason to conduct a commercial and technical due diligence of its investment in Aqua Comms, the owner and operator of Ireland's first dedicated subsea fibre-optic network connecting New York, Dublin and London. The transatlantic bandwidth market was growing at a CAGR of around 60%, driven primarily by the changing distribution strategies of major content and application providers, several of which have key international data-centre interests in Ireland. However, the transatlantic market was highly competitive, with nine cables already in operation and pricing which was lower than for any other long-distance subsea route worldwide. Our analysis needed to take account of this changing environment

The solution

• We reviewed Aqua Comms' submarine and terrestrial network plans, as-built network diagrams, financial model and sales pipeline.
• Our commercial due diligence examined:
  • the market context, including the competitive environment and pricing trends for international connectivity in Ireland and the rest of Europe
  • the key commercial assumptions underlying the business plan developed by Aqua Comms' management, providing alternative assumptions for various scenarios
• Our technical due diligence commented on:
  • the network construction and maintenance agreements and the associated network opex and capex forecasts
  • the evidence of completion and specification for the cable segments and cable landing stations (CLS) in Ireland, the UK and the USA
  • key technical assumptions, including those relating to performance advantages arising from the use of new technologies and topologies

The result

We produced a due diligence report assessing the investment opportunity and highlighting risks and upsides for ISIF's consideration. Taking the results of our due diligence report into account, ISIF subsequently invested USD25 million in equity capital in Aqua Comms.