Cincinnati Bell is among the latest to go private, as the firm has been acquired by Macquarie Infrastructure Partners. Iliad in France wants to do so and Altice Europe did so earlier in 2021.
Among the key drivers for those privatizations is the perception by asset owners that public markets will not positively reward the firms, in terms of equity valuations, commensurate with their revenues, cash flow or potential growth prospects.
Another key driver is private equity firms with lots of private capital to invest, and assets that offer long-term and predictable cash flows.
That, in turn, is matched by desire to invest by pension funds and other entities with long time horizons that view infrastructure assets as equivalents to other long-duration fixed-income assets such as bonds.
Also, asset diversification is another motivation for investors.
There is a good reason why any number of public telecom firms have been taken private, and why others are considering similar moves: high debt, low growth and poor operational performance. And connectivity providers are not the only type of firms facing investment issues.
That is a fairly-common prescription for any public company to be taken out of the public markets by private equity, and many public telco assets fit the bill.
One defining characteristic of infrastructure assets is their monopolistic position. We tend to forget that for most of the history of the industrialized world, much of the funding for large scale public infrastructure such as roads, canals and railroads has come from private sources of capital. And that includes telecommunications in the United States.
The function of private equity also has included the rehabilitation of firms that are not performing financially. Private equity buys a public asset, restructures and then sells the asset, often within about a five-year period.
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