Data Infrastructure is the Next Frontier

Data Infrastructure is the Next Frontier

 For a number of years, we have been investing in the backbone infrastructure behind the internet and mobile phones. We have now reached critical mass with these investments, and as a result they will constitute an increasingly meaningful part of our business.

 Most importantly, we are in the midst of a once-in-a-hundred-year upgrade cycle for data infrastructure. The aging copper infrastructure is no longer able to cope with demands imposed by an increasingly interconnected world. These networks are therefore being replaced by fiber infrastructure, which can support increases in data demand, lower latency and faster broadband speeds. Concurrently, wireless networks are undergoing a transformation to support enhanced connectivity for 5G that is fast coming.

 On a combined basis, these upgrades are expected to require trillions of dollars of capital globally over the next five to seven years. Historically, such investments were funded by telecom operators, but given increasing demands on their capital, they are now seeking funding partners. They are also increasing their reliance on neutral-host, shared infrastructure models to enhance their return on capital.

 Our original thesis for investing in data was based on the belief that data infrastructure assets have utility-like characteristics with favorable growth trajectories and play a central role in connecting people, places and objects. The importance of these networks was further reinforced during the pandemic, as access to robust and reliable connectivity became a basic need for performing routine activities such as working from home, remote learning and telemedicine. This was exemplified by our U.K. fiber networks, where average data consumption increased 40% compared to the same period last year.

 As we expand our operations, we now are reaping the benefits of being one of the largest owners of cell tower portfolios globally, with a contracted base of over 180,000 sites in six countries. In addition, we continue to grow our data center business with approximately 70 sites in 14 countries able to serve the scale and latency requirements of a diverse customer base, and we have fixed and wireless networks serving over 2.5 million residential and enterprise customers.

 There are also exciting opportunities embedded within our broader business. Continued adoption of cloud computing is expected to require very substantial incremental data center capacity over the next decade. At the same time, the users and operators of these facilities are focused on achieving their stated carbon reduction targets. We are well positioned to help support these goals. Combining our renewables group activities with our data center offerings could be a game changer for us.

Bruce Flatt Chief Executive Officer,

Brookfield Asset Management Inc.

August 13, 2020