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Partners Group to Finance Telecommunication Between New York & São Paulo

16 January 2015

(Dow Jones) In a bid to boost communications capabilities between North American and Brazil, Partners Group is committing new capital to back construction of a subsea fiber optic cable, Seabras-1, between New York and São Paulo.

The project, known as Seabras-1 and orchestrated by Beverly, Mass.-based Seaborn Networks Group Inc., is a move to provide an alternative to aging telecommunications infrastructure and add capacity to Brazil, while addressing growing demand for broadband Internet communications throughout Latin America.

Partners Group agreed to provide all of the equity financing for the project, which is estimated to cost roughly $500 million. French investment bank Natixis SA arranged $270 million of debt financing.
Partners Group Managing Director Todd Bright, who leads the firm’s Americas infrastructure business, said Seaborn presented a unique business model.

Historically, telecommunications companies banded together to build subsea cable and then divide usage among themselves. Seaborn will act as an independent wholesaler, selling capacity to telecommunications providers and so-called “content providers” that want to build out their networks, said Chief Executive Larry Schwartz.
Seaborn has customers including Microsoft Corp . on board, seeking access to the network, which will feature newer technology than existing connections.

The existing communications infrastructure was built more than 10 years ago and has “significant limits on upgradeability,” according to a summary of the project presented in June 2013 to the International Finance Corp ., which came on as an investor in 2014.

Similar to many other infrastructure projects, the network is taking longer than initially estimated.

When IFC reviewed the project in June 2013, Seabras-1 was scheduled to be completed in 2015 at a cost of roughly $425 million.

Now, the network aims to be online by the end of 2016, meaning that it will miss the 2016 Olympics in Rio de Janeiro.

“Our focus is on addressing the long-term wholesale needs of Latin America,” said Mr. Schwartz. “Missing the Olympics may mean we miss a six-month or so spike in demand, but that’s largely immaterial.”
Instead, the line will be coming on at a critical time for the existing infrastructure.
Between the U.S. and Brazil, “there has not been a new build since telecom boom years,” said Mr. Schwartz. “These cables have average life of between 22 and 25 years. By the time we go live at the end of 2016, these cables are fast approaching end of their lives.”