Past performance is not necessarily indicative of future results. No assurance can be given that any investment will achieve its given objectives or avoid losses. Unless apparent from context, all statements herein represent GCM Grosvenor’s opinion.
Select risks include: information risk, foreign country exposure risk, construction risk, commodity price risk, operating risk, regulatory risk, and technological risks.
The telecommunications sector represents one of the most compelling infrastructure opportunities that we see today. Exponential growth in data and connectivity has created substantial investment opportunities in the tower, small cell, data center, and fiberoptic cable subsectors, known as “digital infrastructure.” The COVID-19 pandemic has further increased demand for data, accelerating these trends. Consequently, telecommunications infrastructure has proven to be an attractive and resilient sector with continued transaction activity in the current environment.
Here, we highlight some market developments that are impacting digital infrastructure, explore some of the positive characteristics of each subsector, and share insights from our robust pipeline of current opportunities in this space.
Several factors are simultaneously and significantly shifting the digital infrastructure investment landscape. These trends include behavioral changes, an increase in demand for data, and favorable merger and acquisition activity, all of which have positively impacted investment performance and valuations. As a result, the market has continued to grow and scale across subsectors, geographies, and stages of telecommunications infrastructure projects.
Global internet traffic is forecasted to increase at a 26% compound annual growth rate (CAGR) from 2017-2022, with global mobile data increasing at a 46% CAGR over that period.1
Growth in Traffic
Exponential growth in data traffic among businesses, individuals, and communities is the primary driver of demand for digital infrastructure. As traffic has grown, so too have demands on telecommunications infrastructure, specifically regarding:
Shifting work habits due to COVID-19 pandemic
COVID-19 has compounded the pressures on telecommunications infrastructure caused by increasing data traffic. We have seen data consumption spike because of recent work from home trends. Post-COVID peak broadband usage rose 18% while usage during work hours (9:00 a.m. – 5:00 p.m.) grew 43%.2 In addition, the increase in remote work has in turn increased demand for reliable fiber network backhaul and residential broadband.
Favorable transaction environment
With the T-Mobile/Sprint merger completed and the increased capital expenditure guidance of the mobile carriers to support 5G roll-out, higher cell tower lease up activity is expected in the second half of 20203. Within telecommunications, towers are highly resilient opportunities due to increased wireless traffic and carrier spending on tower infrastructure and high free cash flow visibility. Confidence in the sector has driven continued M&A and financing activity since the pandemic’s onset (e.g., Telxius’ acquisition of a portfolio of contracted German mobile towers, Digital Colony acquisition of UOL Diveo, Equinix/GIC joint venture).
Valuation Implications
As a result of the confluence of these aforementioned trends, towers, data centers, and broadband public company stock performance have outpaced broader telecom and S&P indices.4 Pureplay US tower multiples now trade above 30x EBITDA and public data center companies are trading at near all-time highs. Additionally, we see a divergence in valuations, including those between developed and emerging markets, and established and small/build-up platforms5.
There are several subsectors within digital infrastructure, each with certain characteristics that we view as attractive for investment. Projects in our pipeline of mobile towers, small cells, data centers, and fiber maintain many of these traits.
We see a strong flow of digital infrastructure investment opportunities in North America and Europe. Our pipeline reflects a diversified investment strategy by sub-sector, geography, and stage, and includes seven near-term actionable opportunities of scale.
While the sector has seen increased interest and elevated valuations, we believe there are still opportunities that present significant, persistent value. Though we believe a successful approach to the sector must include broad sourcing, in-depth due diligence, and a selective approach to purchasing assets.
We believe GCM Grosvenor is an ideal partner for those who wish to invest in infrastructure. As it relates to digital infrastructure, we have been investing in the sector since 2003, having committed $650 million to investments in data centers, towers, and fiber. Today, our Infrastructure team of 15 dedicated investment professionals manages over $5 billion in global infrastructure investments and maintains global coverage with investments in Europe, North America, and Latin America, and a pipeline of investments diversified by subsector, geography, and stage.
We believe we are one of the most experienced and longest tenured platforms globally, with unparalleled sourcing capabilities. We also have significant board of director representation/influence on underlying infrastructure investments, and a broad network of industry relationships with strategic and financial sponsors and intermediaries to enable originations. All of this, combined with the broader GCM Grosvenor global platform, provides us with a uniquely comprehensive view of the infrastructure landscape, allowing us to present investors with interesting, timely opportunities such as those in the digital infrastructure space.
CHICAGO, Oct. 31, 2023 — GCM Grosvenor (Nasdaq: GCMG), a leading global alternative asset management solutions provider, today announced that GCM Grosvenor Customized Infrastructure Strategies III, L.P. (“CIS III”) completed
EDINBURG, Va., Oct. 24, 2023 (GLOBE NEWSWIRE) — Shenandoah Telecommunications Company (“Shentel” or the “Company”) (Nasdaq: SHEN) announced today it has entered into a definitive agreement to acquire 100% of
Important Disclosures
For illustrative and discussion purposes only.
No assurance can be given that any investment will achieve its objectives or avoid losses. Past performance is not necessarily indicative of future results.
The information and opinions expressed are as of the date set forth therein and may not be updated to reflect new information.
Investments in alternatives are speculative and involve substantial risk, including strategy risks, manager risks, market risks, and structural/operational risks, and may result in the possible loss of your entire investment. The views expressed are for informational purposes only and are not intended to serve as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell securities by GCM Grosvenor. All expressions of opinion are subject to change without notice in reaction to shifting market, economic, or political conditions. The investment strategies mentioned are not personalized to your financial circumstances or investment objectives, and differences in account size, the timing of transactions, and market conditions prevailing at the time of investment may lead to different results. Certain information included herein may have been provided by parties not affiliated with GCM Grosvenor. GCM Grosvenor has not independently verified such information and makes no representation or warranty as to its accuracy or completeness.
Data Sources:
1 Cisco VNI Global IP Traffic Forecast, 2017-2022.
2 Citi, April 29, 2020.
3 TD Securities, June 2020.
4 Goldman Sachs Communications Infrastructure Ecosystem Update, April 2020.
5 FactSet, TD Securities, June 2020, Citi, April 29, 2020.
We offer clients a broad range of tailored solutions across strategies, including multi-strategy, macro, relative value, long/short equity, quantitative strategies, and opportunistic credit. Levaraging our large scale and presence in the industry, we are able to offer clients preferntial exposure to hard-to-access managers and seek to obtain terms that can drive economic and structural advantages.
