Outputs from Metro Connect

Private Tower Multiples Could Weaken by Mid-Year, Creating Opportunities for Large Publics M&A.

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Metro Connect took place in Florida's Fort Lauderdale in February. The following were the primary subjects discussed at this event:

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(1) By the middle of the year, private utility networks should lessen their impact, at which point state-owned businesses can start mergers and acquisitions (M&A, Mergers and aqusition).

(2) FTTH multiples ought to do better, notwithstanding a reduction in building by 2023;

(3) Notwithstanding contributions and acquisitions, there is still a high need for hyperscale networks.

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By mid-year, private tower multiples should start to decrease, providing chances for M&A for large publicly traded corporations.

By the middle of the year, private tower yields are predicted to be on the fall, creating several M&A possibilities for large publicly traded corporations. Due to a lack of private liquidity (fewer markets) and private capital continuing to support the market for longer during a downturn, private towers sometimes lag behind public ones. This transitory situation indicates that opinions concerning the absence of increase in interest rates in the private markets because of the necessity for long-term development are becoming more prevalent.

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The multipliers of private enterprises will progressively decrease after the first quarter of 23 years, according to the CEO of one of the tower equipment operators, when private cash runs out. However, an increasing number of private tower operators are under severe financial strain. Because of rising debt payment costs and SG&A (selling, general, and administrative) expenses due to inflation, some private tower firms have debt loads of 20 times or greater. If rates stay high relative to last year (as projected), then the "stand still" notion for struggling private operators would cut the cost of capital by the day to handle rate/inflation pressures. Capital is used to adjust for these reasons, not for development. Uncertainty surrounds how long struggling private tower firms will be able to endure this time period. Typical survival strategies like leasing operators and developing BTS may not be strong enough to "survive the valley" of low values. While waiting for the ideal time for mergers and acquisitions when the situation changes in their favor, possibly in 2P23, SBAC (Outperform, $297.77) is focused on its lending facilities, and AMT (Outperform, $222.06) is similarly focused on lowering its debt (to a low 5x level, abandoning recent transactions).

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Slowdown for large business operators in FTTH

Recently, major carriers have reduced their FTTH development plans for 2023, yet the rate of construction is still high but lower than anticipated. Specifically, AT&T stated that this year it will only construct up to 2.0–2.5 million fiber points, far fewer than the 3.0–4.0 million points that were originally announced. The business asserts that it will still be able to reach its target of 30 million points by 2025. Altice, however, reports a decrease in its 1.6 million seat goal, underscoring the fact that licensing is still a problem. The management of Consolidated Communications highlighted that while it anticipates that money from public-private partnerships (PPPs) would boost economic performance, building could be delayed.

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Hyperscale data center demand: a list of benefits and drawbacks

Although recognizing the need to use increased power density for Metaverse workloads, Meta is lowering expenses associated with Metaverse-related data centers. In its 4Q22 earnings release, Meta noted a decline in capital investment for 2023. In order to make the transition to a new data center structure that can support workloads with and without artificial intelligence, the business disclosed "revised plans to cut data center building costs in 2023."

Moreover, Meta is upgrading its data centers' power densities, which will need a larger reliance on liquid cooling.

Microsoft's growth pace has lately increased, particularly in international markets, as the corporation needs more capacity to keep up with the expansion of its platform.

Oracle has increased its capacity rental activity (and on a considerable scale) in addition to meeting Microsoft's growing demand, as it is also worried about capacity shortages. Although it is still unknown if Oracle's large rise in leasing demand is due to TikTok workloads or support for its own cloud platform, the market for data centers as a whole is benefiting from Oracle's increased demand.

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