As more private equity and institutional investment funds ponder taking stakes in digital infrastructure assets--including access networks, data centers and fiber backbone assets--we will have to see where the operator comfort level lies. Few have fundamental qualms about divesting tower assets.
The issue is how much broader involvement in entire core or access assets could occur. Traditionally, private equity investments have been concentrated elsewhere, especially in real estate, energy assets, business services and software. But telecom infrastructure investments have been growing.
Telecom transactions accounted for 35 percent of total private equity infrastructure deal value in 2020, up from 15 percent a year earlier, Preqin data shows.
Telecom deals involving towers, fiber and data centers are now viewed as possible holdings in the alternative assets portfolio, which generally focuses on transport, energy and utilities.
The trend has been in place and growing for some time, sometimes driven by the traditional “fix and sell” (leveraged buyout, consolidate assets, flip to strategic buyer) model, but with some increasing longer-term holding as well, where private equity might take a minority stake in an operating company without plans to flip the stake in less than six years.
source: Columbia Business School
Recently, some big divestitures of whole networks, accounts and infrastructure have occurred, primarily revolving around rural and less-dense fixed networks. Lumen Technologies recently divested about half its fixed network assets, for example.
And increasing attention seems to be paid to operating assets more efficiently, a traditional driver of private equity investing strategy.
Asset reshuffling tends to be rather common in the connectivity business, with occasional bouts of merger unwinding. Consider the proposed sale of Lumen fixed network assets to Apollo Global Management.
Basically, the deal unwinds the merger of CenturyLink and Qwest fixed network assets (more an acquisition by CenturyLink of Qwest) in 2011. What remains for Lumen are the original Qwest local exchange operations, plus networks in Florida and Nevada that were not part of Qwest.
Perhaps more important is the Lumen retention of the former Level 3 Communications assets. The proposed deal still leaves Lumen a bit of a hybrid: operator of large tracts of rural fixed networks, plus a handful of tier-two cities, as well as a global enterprise services network.
The larger point is that different financing mechanisms for core telecom infrastructure might be entering a phase where there is more “burden sharing” than in the past with private investors.
That might be far more successful than regulator-forced sharing.
No comments:
Post a Comment