Private equity firms have become increasingly important players in telecom provider mergers and acquisitions (M&A) in recent years, according to a new report from global business consultancy Deloitte. Telecompetitor spoke with Duncan Stewart, director of research for Deloitte’s Center for Technology, Media & Telecommunications, about this and other telecom M&A trends.
Private buyers were involved in more than 80% of global telecom M&A deals in the first half of 2024, up from just over 60% in 2021, according to Deloitte (a trend that Telecompetitor also has noted).
Globally, the value of PE-backed telecom deals was $28 billion in 2021 and $20 billion in 2022. Rising interest rates caused a slowdown in the second half of 2023 and first half of 2024. But Deloitte saw a rebound in the second half of 2024, when the value of PE-backed telecom deals was $11 billion.
There may be plenty more private equity funding where that came from. According to Deloitte, private equity firms globally have over $300 billion of available capital to invest in “longer-duration, high-yield infrastructure assets.”
As Deloitte’s 2025 Telecom Outlook report puts it, private equity currently has “record levels of dry powder.”
Deloitte’s outlook is somewhat different from what Telecompetitor heard from financial advisory firm Alix Partners back in October. At that time, Andrej Danis, partner and managing director for Alix Partners, told us that some PE firms were rethinking fiber investment because of the increase in the cost of capital.
Interest rates dropped slightly after we spoke with Danis. But they are still higher than they were a few years ago.
When we asked Stewart about all this, he said, “We have had talks with private equity firms globally who have questioned if the historical rate of return you get from fiber has decreased by several points in the last five years, which suggests either that prices need to come down or that they are less interested than they were a few years ago.”
He added, though, that this has been more of a concern in Europe and Asia than in North America. Fiber-focused deals continue to be popular here, he said.
Private Equity Telecom M&A
Stewart expects to see more of what Deloitte calls “devcos” — joint ventures aimed at building and growing companies in specific markets. Although Stewart declined to name specific companies, this clearly was a reference to joint ventures such as the one that AT&T has with investment firm BlackRock and that T-Mobile has with two investment firms.
Another trend Deloitte sees is that there are more deals in which the purchaser buys only part of a company. The Deloitte report cites the example of Rogers Communications in Canada, which sold a minority interest in a portion of its wireless backhaul transport infrastructure, thereby freeing up money to invest in its core business.
As Stewart put it, some PE firms now are willing to buy “part of a part of a company.”
For providers, these deals offer a way to obtain funding for investment in other areas of the business.
When we asked Stewart how long PE firms will want to hold their telecom investments and what their exit strategy will be, he said most firms will hold their investments for five to seven years.
If they are “unlucky,” he said, the timeline could be as long as 10 years.
As for their exit strategy, he said, they’ll do an initial public offering (IPO) “if the IPO window opens.” If not, he said, they will need to look for other exit strategies.
Stewart said he wouldn’t be surprised if the volume of private equity telecom M&A deals slows because “a lot of deals that could be done have been done.”
As consolidation happens, though, he sees the values — although not necessarily the valuations — rising for those individual deals that do occur.
Uncertainty about interest rates remains a concern, however. Stewart noted that in his talks with investors, about one third of them expect interest rates to remain about the same, about a third expect interest rates to rise and about a third expect interest rates to fall.
