Private equity money has been flooding into the broadband market over the past two years. Everywhere you look, someone has a PE partner of some kind. AT&T teamed with BlackRock, Brightspeed has Apollo Management and Mubadala, Ting Internet has Generate Capital and Ziply Fiber has WaveDivision Capital, Searchlight Capital and others. But according to Grain Management, not all PE investors are created equal.
“There are natives and there are tourists,” a representative for Grain Management told Fierce Telecom. Natives, of course, are those who – like Grain – specialize in telecom and have a track record of successful investments in fiber, towers, spectrum or data centers. “This sector has been flooded with first-time investors, but what distinguishes successful investors is a skillset and history in the telecom space.”
Grain has a vested interest in making this argument. The company considers itself a broadband specialist and has already invested in a range of companies including Great Plains Communications, Ritter Communications, Summit Broadband, Hunter Communications, LightRiver and, most recently, Quintillion.
Asked what exactly “native” investors bring to the table that first-timers don’t, the representative said specialists can access opportunities that other less specialized firms may not. That’s in large part because of the extensive relationships these companies have built up with vendors and other partners.
“The telecom specialists can help a portfolio company address and mitigate supply chain and workforce challenges, for example,” the Grain representative said.
After receiving an investment from Grain in 2022, LightRiver President Mike Jonas highlighted the depth the firm had on its bench when it came to regulatory and manufacturing connections and business development expertise.
“Certainly the contacts that they have in the industry are going to be valuable. So, they will give us access to maybe folks we didn’t know,” he said at the time.
PE vs public money
According to Pitchbook data published by the American Investment Council in November, the number of U.S. private equity deals in the telecom space fell from roughly 40 to about 30 between 2020 and 2021. However, the value of those deals skyrocketed from a hair under $4 billion to just under $9 billion in the same period.
The Grain rep said PE is a good tool to supplement government funding, such as the $42.5 billion Broadband Equity, Access, and Deployment (BEAD) Program. What it is not, however, is a replacement. That’s because “before all else, PE investments have to make economic sense. The BEAD program is an important tool to support regions that may otherwise not be seen as economically viable.”