Data centres get most of the attention in digital infrastructure, but they depend on two other kinds of asset to be useful at all: the fibre-optic cables that carry data between buildings, homes and businesses, and the towers and masts that carry mobile signals. Both have attracted large amounts of investment in the UK over the last decade, as the country has moved from copper phone lines to full-fibre broadband and from 4G to 5G.

This guide explains how fibre networks and telecom towers earn money, the ways investors can gain exposure, and the risks that matter most. It sits alongside our guide to data centre investment in the UK, and you can see the whole category on our digital infrastructure hub.

Fibre networks: how they make money

A fibre network is expensive to build and cheap to run. Most of the cost goes into digging trenches, laying ducts and connecting premises. Once the network is in place, the owner earns revenue by selling broadband to customers directly, or by wholesaling access to internet service providers who sell to consumers under their own brands.

The key measures for a fibre business are how many premises the network passes, and how many of those actually sign up, known as the take-up or penetration rate. A network that passes many homes but signs up few of them can struggle to cover its build costs, which is why take-up is one of the most important figures for investors to understand.

Telecom towers: how they make money

Tower companies own masts, rooftop sites and the land beneath them, and lease space on them to mobile network operators. Leases tend to be long, often ten years or more, and frequently include annual price increases. Because several operators can share a single tower, each additional tenant adds revenue with little extra cost, which can make well-located towers very profitable. Many UK operators have sold their towers to specialist owners in recent years and now lease them back.

Ways investors get exposure

Listed companies and investment trusts

The most accessible route is through shares in listed telecoms and tower companies, or listed infrastructure investment companies that hold fibre, towers and other digital assets. These can be bought and sold daily, but their share prices move with the wider stock market and with interest rates.

Unlisted infrastructure and private equity funds

Many UK fibre builders and tower portfolios are owned by private infrastructure and private equity funds. These funds typically lock up capital for many years and are generally only open to investors who qualify as sophisticated or high net worth.

Direct opportunities

Some unlisted opportunities offer equity or loan notes in a specific regional fibre network or tower portfolio. These concentrate risk in a single business and are usually far less liquid than listed alternatives.

The risks to understand

  • Competition and overbuild: in some areas, several fibre networks have been built along the same streets, splitting customers between them and reducing returns for each.
  • Take-up risk: a fibre network's value depends on persuading households and businesses to switch, which can take longer than forecast.
  • Build costs and funding: networks still under construction need continued funding. Rising costs or difficulty raising money can stall a build.
  • Tenant concentration: tower income depends on a small number of mobile operators, and consolidation between operators can reduce demand for sites.
  • Interest rates: like other infrastructure, valuations are sensitive to interest rates.
  • Technology change: while fibre is expected to have a long useful life, new technologies, including satellite broadband, could affect demand in some areas over time.

What to check before investing

  • Whether the opportunity is listed or unlisted, and how and when you could exit.
  • For fibre, how many premises are passed, the current take-up rate, and how much of the network is still to be built.
  • For towers, the number of tenants per site, lease lengths and price escalation terms.
  • How much competition the network faces in its areas.
  • The experience and financial strength of the operator, and who else is funding the business.

Our guide on how to compare alternative investment providers covers the wider questions worth asking, and our overview of UK alternative investment options shows how infrastructure compares with other asset classes.

This article is general information only and does not constitute financial advice. Infrastructure investments can fall as well as rise in value, and unlisted opportunities may be impossible to sell for many years. If you are unsure whether any form of alternative investment is right for you, seek independent advice from an FCA-authorised financial adviser.