Rural communications companies well positioned to


DENVER, March 24, 2022 (GLOBE NEWSWIRE) — Independent communications companies are well positioned to benefit from infrastructure funds and growing interest from private equity sponsors in private operators. Private communications companies, which operate primarily in rural markets and tier three cities, are seeing an abundance of strategic investors willing to provide capital for broadband upgrades or outright buyers willing to pay a premium for their business.

The market valuation gap between private and public communications companies is wider than it has ever been. While private operator valuations have remained consistently high, shares of publicly traded cable companies recently traded at their lowest level in 52 weeks. And the huge gap in valuations is likely to persist for the foreseeable future, according to a new report from CoBank’s Knowledge Exchange.

“There has always been a valuation gap between public cable companies and private communications operators that offer internet, cable and phone services,” said Jeff Johnston, chief communications economist at CoBank. “But the current gap is the biggest we’ve ever seen. It is a market environment that puts many independent rural suppliers in the driver’s seat when it comes to negotiating the terms of a strategic partnership or an outright sale.

Based on recent transactions, earnings before interest, taxes, depreciation, and amortization (EBITDA) valuations of private communications companies are more than twice the average valuation of major publicly traded cable companies.

Public cable companies are facing several headwinds that are putting downward pressure on their valuations. Stock markets have come under enormous pressure in recent months due to rising inflation and interest rates, a less accommodative Federal Reserve, and the Russian-Ukrainian war, among other factors. Stock markets tend to react to market shocks faster and with much higher volatility than private markets where investors generally have a longer time horizon.

Another factor holding back public cable valuations is growing competition for broadband services from major telcos. AT&T and Verizon are making large investments in fiber optics to bolster their legacy DSL networks, positioning themselves to become more formidable competitors and ultimately taking broadband market share from the cable operators.

Verizon and T-Mobile are also aggressively rolling out fixed wireless access (FWA) as an alternative to fixed broadband. Opinions vary on how FWA will disrupt cable companies, but public equity investors don’t like uncertainty and FWA makes them nervous.

As public companies struggle against headwinds, their private counterparts serving rural markets are enjoying the headwinds of less competition and a massive influx of federal funds allocated to help bridge the digital divide.

The lack of competition for broadband services in rural areas gives operators better pricing power and better long-term growth prospects, both of which are attractive to investors. And given the expensive nature of serving rural markets, government funding is fueling investor interest to buy and invest in rural broadband markets.

Read the report, Big Gap in Valuations Puts Private Companies in Broadband Catbird Seat.

About CoBank

CoBank is a $170 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural electricity, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated agricultural credit associations serving more than 76,000 farmers, ranchers and other rural borrowers in 23 states nationwide.

CoBank is a member of the Farm Credit System, a national network of banks and retail lending associations licensed to serve the borrowing needs of agriculture, rural infrastructure and rural American communities. Based out of Denver, Colorado, CoBank serves customers from regional banking centers across the United States and has an international representative office in Singapore.


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