On Valentine’s Day, a new couple officialised their match with a series of filings to the Companies Registration Office. The documents established Irish branches for two new related companies, Fibre Networks Ireland Ltd and Fibre Networks Ireland Holdings Ltd. Both are registered in Jersey and represented by directors Sorcha Nic Mhurchu, eir’s legal director, and Stephen Tighe, the telecommunications group’s chief financial officer.

Fibre Networks Ireland is to take possession of eir’s wholesale fibre broadband network. The asset connects central exchanges to a growing number of homes and businesses with the high-speed technology. Eir announced at the end of January that it would own 51 per cent of this new company and run it as a joint venture with Paris-based Infravia Capital Partners holding the remaining 49 per cent. 

This is the latest in a string of Irish telecoms and healthcare deals for the French private equity firm over the past seven years, and probably not the last. On a recent visit to Paris, I paid a visit to Infravia partner Bruno Candès, who has worked on all of them.  

Candès is from rugby-mad French Catalonia and says he routinely draws on memories from his playing years to break the ice with potential Irish business partners. In the lobby of Infravia’s office off the Champs-Elysées, a rugby ball features on a giant cartoon commissioned by the firm to mark its 10th anniversary.

The artwork also depicts the range of transport, telecommunications and health infrastructure in Infravia’s portfolio, overflown by a Millenium Falcon spaceship – Candès tells me he and other partners at the firm are committed Star Wars fans. This is confirmed when we sit down in Room Obi Wan for this interview.

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Candès says Infravia has raised around €10 billion in its almost 15-year existence to target investments in European infrastructure and technology. It has closed four successive rounds from institutional investors – initially French but now coming from as far away as the US and Japan – and currently offers them its Infrastructure Investing Fund Five as well as a new technology growth fund.

“What we are seeking is to find some good infrastructure businesses, grow them up, scale them up, invest in growth, build more capacity, consolidate the market, as the case may be. And as we do that, bring scale and create value for our investors,” says Candès. “It’s really about putting capital at work in Europe and creating infrastructure champions or tech champions.”

As one of 11 partners in Infravia, he says he is part of a small group of senior executives who own and control the firm. “I’m one of the partners in charge of the infrastructure strategy,” he says. “We don’t have a sector. We have a little bit of expertise allocation within the team, but we are genuine generalists, which is a good way to keep the investment discipline.”

Candès says Infravia’s projects stretch from Malaga to Helsinki. A few years after it started, however, the firm began to look further west. “That was 2014, 2015. At the time, Ireland was barely exiting the sovereign debt crisis and we felt that it was a market that was still, as an investment destination, relatively untapped by our peers and institutional investors generally.”

Candès and his colleagues assessed how the country was recovering from the property and banking crisis and liked what they found, especially when it came to separating good and bad debt. They concluded it was safe for private equity to return to Ireland – or, in Infravia’s case, to set foot in the country for the first time.

“It’s a very, very good ecosystem of business. And now a banking system that does work again. You have good banking, good liquidity, good law, English-based transactional dynamics, good entrepreneurs, and a great opportunity to invest,” says Candès. “What we like with Ireland generally is, although we are a mid-cap fund, by investing mid-cap-type investments we can still invest in companies that can play a role in the market, because by definition, it’s a smaller economy than Germany or France or the UK, for example.”

Infravia had experience investing in telecoms assets and Candès finds that the industry is a good place to enter a new country. Early 2015 happened to be the time when Coillte put its network of 300 transmission tower sites on the market, on which the state-owned forestry company owned 116 of the masts outright. This business unit was to be named Cignal.

“Cignal was not the first thing we looked into in Ireland but we got very excited by the opportunity. Essentially, we had a very strong conviction on the telecom tower business: everything around more mobility, 4G, 5G rollouts requiring more sites, the densification of the network,” Candès says. “The process was to acquire towers and telecom sites from Coillte, the national forestry company. We felt that it was managed – well managed, by the way – as a real estate portfolio. And we felt there was a tremendous opportunity – by investing more, by developing processes, developing products, M&A, consolidation, more capex – to create a real towerco, which is a kind of code name for these telecom tower businesses, from that initial real estate portfolio. And that’s exactly what we did.”

The deal was sealed in July 2015 and Coillte reported securing a €67.5 million payment for its telecoms business. Once Infravia had the keys to the mast sites, it got down to work. 

“Over and above the organic growth, we’ve been able to acquire new sites, develop new sites for operators, really transform this forestry real estate Sleeping Beauty into a real industrialised towerco,” says Candès. After four years of this treatment, the makeover got noticed. “We were hoping to keep it for longer but then we got approached by a strategic player that saw the potential available and was willing to pay a portion of that potential, and frankly made an offer that was quite appealing for us. On that basis, we decided to exit. It was an unsolicited proposal, we could have held it for much longer.”

The buyer was the Barcelona-based European industry leader Cellnex, who acquired Cignal in September 2019. When it took over the Irish business, it was operating 546 sites and had 600 more planned. Cellnex reported paying Infravia €210 million for Cignal – more than three times the 2015 acquisition price.

Irish nursing homes tick all the investor boxes

In the meantime, Infravia had entered the industry that would become its largest investment target in Ireland: private healthcare. Its first deal in this area was the acquisition of the CareChoice group of nursing homes in 2017.

Candès says a rare combination of four factors fed the rationale behind this move. “First of all, Ireland is a relatively young country compared to European peers. So the wave of ageing that we have seen in the UK, France, let alone Germany, has yet to arrive in Ireland. It is going to arrive over the next 10 years.”

“Number two, a highly fragmented market in Ireland – a lot of small homes. We felt we could be a catalyst for starting consolidation and, for lack of a better word, institutionalisation or corporatisation of that business, because this is a business that can use scale if you think of what digital can bring, what access to staff can bring, and so on.”

The third element is the state’s Fair Deal scheme, which covers the cost of elderly citizens’ care against partial recovery from their estate. Candès says the scheme is well-funded. “By that, I mean it’s very transparent for the families and the operators. It’s government-funded, you have visibility. It’s tracking, more or less, to inflation.”

The fourth and final piece of the puzzle that attracts Infravia to nursing homes is ownership of the underlying properties. “We are not private equity trying to separate property from operation, we like both as an infrastructure investor,” says Candès.

The 2017 deal saw Infravia acquire CareChoice from another private equity house, UK-based Emerald Investment. Accounts filed for that year by CareChoice Holdings Ltd, the new vehicle set up by Infravia to hold the business, show that it initially received a €50 million investment across shareholders’ loans and equity. This covered the acquisition of the existing CareChoice group’s entire share capital for €29.4 million and the addition of a nursing home in Trim six months later for €10.5 million.

“Since then, it’s been working well – I mean, with the caveat of Covid, evidently,” said Candès. “We mobilised a lot more capital to build more capacity, build new homes or expand existing homes, consolidate the market. We’ve done a bit of M&A as well. We have transformed the group from what was, in 2017, a 400-bed group, and now we are en route to have 1,500 to 1,700 beds in the next two to three years. All of that with full ownership of propcos, more than 90 per cent of single en-suite bedrooms, digitised process.”

In the past 18 months alone, CareChoice has reported acquiring four independent nursing homes, bringing its portfolio to 14 locations:

• 59-bed Newtownpark House in Blackrock, Co Dublin for €18.2 million in October 2020;
• 73-bed Beaumont Residential Care in Cork for €13 million in December 2020; 
• 62-bed and 28-independent-living-unit Elm Hall in Celbridge, Co Kildare for €15.3 million in April 2021; and
• 63-bed Brookfield Care Centre in Leamlara, Co Cork for €6.8 million in June 2021.

By the end of 2020, CareChoice’s assets had grown to €200 million and its revenue to €52.5 million. Candès attributes this expansion in equal parts to acquisitions, new homes and extensions to existing ones. But the first year of the pandemic took its toll on the business – not only financially. “2020 was a heart-breaking and incredibly difficult year for so many of our nursing home residents, their families and our staff,” chairman James Tolan wrote in a statement attached to the group’s annual account. “Tragically, we lost a number of our residents to Covid-19 in both the first and third waves,” he added, extending CareChoice’s condolences. 

Associated costs exploded and left the group with a pre-tax loss of €8.4 million. CareChoice’s accumulated losses nearly doubled in 2020 to reach €23 million. Yet Candès says this does not put Infravia’s investment into question. Instead, he focuses on longer-term issues: “The biggest challenge, not as CareChoice but as an industry and not only in Ireland, that we are facing is access to staff. These are difficult jobs, people that are dedicating their life to take care of elderly people. This is important. This is a very noble mission.”

Candès says that Infravia’s investment horizon in CareChoice has another two to three years to run. I put it to him that the buy-and-build strategy deployed to grow the group is making it attractive to one of the industry’s major European players on exit.

“I think we have two routes. One could be financial sponsors that can do the next cycle of growth, which is going to be further concentration and more capex,” he replies. “But you’re right about strategics. I mean, there are a lot of groups that are expanding outside of their initial domestic borders and there is European consolidation happening as we speak.”

A hub-and-spoke strategy for the Mater Private

One year into its CareChoice investment, Infravia stepped up its presence in Irish healthcare with a much larger deal – the acquisition of the Mater Private Hospital. The French firm’s investment came in the form of a €371 million shareholder loan, leveraged with a €220 million in syndicated debt raised from eight Irish and European banks. Infravia’s own investment attracts an interest rate of 7 per cent and is committed until the end of 2028.

The interview turns to this major piece in the firm’s Irish footprint and I ask Candès what his strategy is for the Mater Private.

Bruno Candès (BC): We have two hospitals – three actually. We have two main hospitals: Eccles St, the flagship hospital, and then one in Cork. [The group also includes the Mater Private Cancer Centre at University Hospital Limerick.] The strategy is high-acuity care, so mostly heart and vascular – this is the number one heart centre in the country by far –, a strong orthopaedics practice, and really accelerating on oncology. So that’s what we do. The strategy for the Mater is, we’re not going to consolidate through M&A; what we are trying to do is a hub-and-spoke type of strategy. By that, we mean trying to decentralise access points to basically make the Mater experience more digital, but also more accessible across the country – across Dublin primarily – to have an easier experience for patients and consultants as the case may be. That’s consultation and radiology. So that’s going to drive consultation, and if there is a need for procedures, then patients will go into the main site on Eccles St.

But the idea is to have several consultation points around the city so that we are not constraining our access to people who have to drive to Eccles St to see a consultant. We come to the patients because of the quality of the consultants first and the quality of care that Mater can provide. We are trying to enable that through digital as well. These centres – we have two as we speak, one in Northern Cross and one in Cherrywood in south Dublin. We are trying to basically develop that hub-and-spoke where we have these satellite sites that have consultation and imaging. Then when there is a need for a procedure, patients can go on the Northside to get their operations done. By that, we’re leveraging the main infrastructure and we are making that infrastructure more easily available and accessible to more patients. That’s the idea and that’s in the making.

Thomas Hubert (TH): That will be the value-added before an exit.

BC: That’s one. We are going through a fundamental digital transformation as well. We’re accelerating our leadership on heart and vascular with the recruitment of Professor [of cardiology Robert] Byrne. And we have a partnership with the RCSI with an academic component. So we really are accelerating on that. We want to replicate that in oncology and that’s long-term work. We want to modernise Eccles St’s infrastructure where we will build a ninth theatre in the short to mid-term, possibly expand Eccles St where we are acquiring and have room to expand – space to extend upwards and laterally.

So that’s the plan: digital, hub-and-spoke, accelerate that leading position on heart and vascular and replicate that in oncology. If we do that well, and that’s a lot of work, that would be a tremendous success. Because the brand is exceptional, the quality of consultants is exceptional. The patient experience is exceptional. But transforming healthcare takes time, because we’re running a hospital.

TH: The timeframe I’ve heard of is about 10 years. So that’s what you’re looking at, to go from 2018 to 2028.

BC: Academically, yes. It could be earlier, it could be later.

TH: That’s a short time to do all this.

BC: But it’s a long time in one man’s life.

TH: In private equity especially. Two things are happening in the sector in Ireland that are interesting. One is consolidation, we’ve now got basically Larry Goodman, Denis O’Brien and yourselves with the flagship private hospitals. Do you see more happening? 

BC: It’s tough to say.

TH: The other thing that’s a big trend is potentially Slaintecare, the government strategy to realign public and private healthcare. Do you see that as having an impact on your business?

BC: It’s a threat and it’s an opportunity. I like the idea of public and private working together. This is genuinely what we mean. I think the fundamental role of the public sector is to regulate and control and deliver, in some instances, care. But within the rights regulation framework, there is a full role for the private sector that brings capacity, that can bring possibly more investment, technology, and one should not oppose one to the other.

That’s the fundamental belief. But that’s at the core of what we’ve been doing in infrastructure for the last 30 years. Infrastructure is about bringing public and private interests together because we are dealing with essential assets, essential services that you cannot build against either public policies or just good common sense. That’s what we’ve been doing in transportation, that’s what we’re doing in energy, that’s what we’re doing in telecoms and that’s what we can do in healthcare. 

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The Mater Private’s latest available accounts saw the group’s revenue decline from €265.5 million in 2019 to €246.9 million in 2020 under the impact of the pandemic. This decimated operating profit, which fell from €23.1 million to €7.5 million. Annual pre-tax losses mounted from €30.4 million in 2019 to €47.5 million in 2020 – though this was after booking €29.5 million in interest payable to Infravia under its shareholder loan.

Part of this remuneration has been at the centre of a legal dispute with the state, previously covered in detail by The Currency. The Mater Private entered into the agreement between the HSE and private hospitals to provide care capacity and release pressure on the public health system at the start of the pandemic from April 2020. The HSE, however, later refused to pay a €6.6 million portion of the bill presented by the Mater Private under this deal, claiming that it covered debt interest payable to Infravia to extract profits from the business. 

In the Commercial Court, the hospital and its owner have made the case that these costs were essentially for use of the Mater Private’s infrastructure, which would be rented at a cost if its owners weren’t providing it, and therefore eligible to be covered under the agreement with the state. 

Candès declined to discuss the case because it remains before the courts, which have yet to return a decision. 

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To connect to the internet, homes and businesses first used traditional phone lines made of copper wire. As capacity and speed expectations increased, operators worldwide gradually replaced this network with fibre optic cables – first on core networks, then as far as cabinets on street corners and, increasingly, all the way into the end customers’ premises. The longer the distance between a customer and their closest cabinet or exchange, the more dramatic the improvement achieved by upgrading from copper to fibre.

Eir is no exception to this fibre-to-the-home trend. After rolling out fibre to its cabinets, Ireland’s largest network operator stretched fibre to 335,000 rural customers – those it decided were far enough to see a big difference from a fibre upgrade, yet close enough to reach at a profit. 

The rest of rural Ireland was deemed too expensive to connect commercially and left for the state-subsidised National Broadband Plan to cover. 

Once that was done three years ago, eir turned its attention back to towns and cities, where the race was on again. This time, the plan is to roll out fibre between urban cabinets and individual homes and businesses. Competitors on this front are Virgin Media, which is upgrading its leading urban cable network to fibre, and Siro, the joint venture with ESB and Vodafone rolling out new fibre in towns around the country.

Eir currently has fibre rolled out to the door of 725,000 premises. It now wants to reach 1.9 million by 2026 at a rate of 200,000 this year and 250,000 thereafter.

That’s a lot of money. Having spent €250 million on rural fibre-to-the-home, then chief executive Carolan Lennon announced in February 2019 that eir was to invest another €500 million in filling the fibre gap between cabinets and 1.4 million homes. The company has since added another 200,000 to reach the total 1.9 million target.

That’s a lot of figures, but they are all important because their combination allows us to work out where eir’s fibre roll-out stands at the moment. They suggest that the company has spent nearly €400 million to date and needs to at least double this to reach its final objective – and do it fast to secure customers before competitors do. 

For every premises switching from an old copper landline to its fibre-to-the-home network, eir’s wholesale division open eir can charge arond €5 extra per month. It also brings it closer to the day when it can switch off its old copper network and generate considerable savings.

With this in mind, eir went looking for a co-investor last October. Infravia was immediately interested.

“We’re not just going to buy something and sit on it. There will be tremendous investment going forward.”

“We knew the business,” says Candès. “We know telecoms infrastructure very well, we know Ireland as an investment destination very well. It was the right size for us. We felt it was really one we wanted to be on top of and we’ve allocated the resources and the energy to get it done.”

Now the deal is agreed and needs to go through competition clearance before it closes, probably this summer. Fibre Networks Ireland, the joint venture between eir and Infravia, will own the network and make it available to open eir.

“This network will be able to accommodate eir’s internal demand but also other operators. B2B, or B2C largely, on a wholesale open-access basis. That’s a very standard fibreco model that we have seen in many other places in Europe,” said Candès. He would not be drawn on the revenue model agreed between open eir and Fibre Networks Ireland.

The price Infravia is paying for its 49 per cent share of the joint venture remains confidential, too. Based on the above capital expenditure figures alone, however, it can be expected to be at least €200 million for its half share of the existing network, with as much to be invested again in the next four years.

“The idea is to buy existing infrastructure,” Candès said, “but also to roll out to 1.9 million homes. So yes, there will be significant capex investment, new investment to bring fibre across the country. That’s the vision, that’s the ambition.” 

“There will be follow-on investment,” he added. “We’re not just going to buy something and sit on it. There will be tremendous investment going forward to accelerate the migration from copper into fibre and build fibre basically across the country.”

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Seven years on from its first deal here, Infravia is clearly hungry for more Irish assets. Its existing platform CareChoice is on track to acquire more nursing homes. The French firm has also been looking outside the healthcare and telecommunications sectors. 

“I think it’s a great country for renewables, so that’s somewhere we could play. We haven’t found the right platform but energy and renewables, yes,” Candès says. “We looked at several data centres at the time, which is a natural hub, given the importance of the tech ecosystem in Dublin, but this is very much power-constrained now in Dublin and getting a power authorisation is extremely scarce.”

Would Infravia enter Ireland’s busy build-to-rent housing scene? No, says Candès – too much of a pure financial play. “We are here to bring essential services, good, basic infrastructure to people. We’re not here to do a short-term bet on the housing or real estate market.”

The French firm, however, could become an investor in Irish start-ups transitioning past the early stage, he says. “Dublin has a strong tech ecosystem. We have a tech fund. So are we going to see emerging from the VC Dublin ecosystem some companies that are eligible to our growth tech fund? Yes, possibly and that’s something we would love to look into at some point.”