Month: March 2021

Telecom Biden targets $100B for universal broadband access in $2T plan

Source: Fierce Telecom

U.S. President Joe Biden outlined a plan to allocate $100 billion to fund broadband improvements with the goal of achieving 100% coverage by 2030, as part of a newly unveiled $2 trillion infrastructure package.

Among other things, the legislation would prioritize construction of “future proof” broadband infrastructure, as well as networks owned by “providers with less pressure to turn profits,” including local governments, non-profit organizations and co-operatives.

It would also require internet providers to “clearly disclose” pricing, as part of a bid to remove obstacles that prevent municipally-owned providers and co-ops “from competing on an even playing field” with private companies. Finally, it would seek to reduce the cost of broadband to boost adoption in both rural and urban areas.

A press release issued by the White House noted more than 35% of rural citizens in the country lack access to broadband service offering “minimally acceptable speeds,” which the government defines as 25 Mbps download and 3 Mbps upload.

On a background call with media, a senior administration official called the internet “the electricity of the 21st century,” adding Biden’s plan aims to achieve “universal access to affordable broadband in this decade.”

Response

Biden’s proposal elicited praise from the Wireless Internet Service Providers Association (WISPA), which said in a statement the president’s focus was “right on target.”

However, analyst Blair Levin with New Street Research, noted much hinges on how the final legislation defines terms such as “future proof” and “affordable.”

For example, Levin said if only fiber is viewed as “future proof,” then wireless technologies such as 5G and satellite could be left ineligible for funding. Similarly, he pointed out implementation could look very different depending on whether “affordable” is used to refer to average broadband costs or entry-level pricing.

The bill must be approved by Congress and signed by the President to become law.

Fastly Stands At The Leading Edge Of Edge Computing

Source: Nasdaq

Fastly, Inc. (FSLY) is literally at the leading edge of an emerging technology called edge computing, which promises to significantly improve the performance of many cloud-based applications such as online gaming and augmented reality. While the concept of edge computing is fairly new, it is based on the mature technology, Content Delivery Networks (CDNs). A CDN consists of a network of hundreds or thousands of points-of-presence (PoP) spread out around the world that are used to cache static images, videos, and data, thus reducing latency and offloading the data center from repetitive tasks.

Edge computing is the next step in the evolution of CDNs. Extremely fast processors and solid-state-disks are placed in the PoPs, resulting in a significant improvement in bandwidth and cloud-based application response time.

Fastly is a pioneer in edge computing and arguably provides one of the best overall solutions. Edge computing competitors include legacy CDN providers such as Akamai Technologies (AKAM) and Cloudflare (NET), as well as large cloud platforms such as Amazon’s (AMZN) Lambda@Edge and Microsoft’s (MSFT) Azure Edge Zones.

Despite the competition, Fastly’s annual revenue increased by 45% in 2020. This is a pretty astounding performance considering that TikTok, a major customer representing more than 10% of its business, stopped using Fastly’s platform due to political events in the U.S.

Foray Into Cybersecurity

Fastly provides a best-of-breed edge computing technology, but it offers limited cybersecurity features, an area where competitors such as Akamai have an advantage.

While the Fastly network of PoPs has local Distributed Denial of Service (DDoS) protection, it does not have other capabilities such as a Web Application Firewall (WAF), which prevents hackers from injecting malicious code onto a website. However, that changed last summer with the acquisition of WAF supplier Signal Sciences. The deal will not only improve Fastly’s competitive posture, but it will also provide new opportunities for cross-selling between the edge computing and cybersecurity applications.

Is Fastly A Compelling Investment?

There is no question that Fastly is in a good position to grow into its extremely large total addressable market. Fastly should make a great long-term investment, but is now the best time to invest?

The company’s business model is consumption-based, and its recent achievement of 45% revenue growth will be difficult to match as the world emerges from the pandemic. Employees will return to work, students will go back to school, and internet traffic will likely decrease. On the other hand, next generation applications such as autonomous vehicles, virtual reality, and the Internet-of-Things (IoT) are on the horizon and may pick up the slack when it comes to internet traffic.

Another issue, though, is the high valuation that the stock commands, keeping in mind that the company is not profitable. The best financial metric for high-growth companies is the price/sales ratio, and for Fastly, it is 25. The high figure is substantiated by the annual revenue growth of 45%, but one miss-step and the stock price could fall dramatically.

Wall Street’s Take

From Wall Street analysts, Fastly earns a Hold consensus rating, based on 2 Buys, 3 Holds, and 1 Sell. Additionally, the average analyst price target of $81.80 puts the upside potential at 28%.

Summary And Conclusions

Fastly is an industry leader in edge computing, a technology that offloads traffic from data centers and other cloud platforms, while providing significantly improved latency and bandwidth for web applications. The total addressable market is huge, and we are still in the early innings.

Fastly is capturing market share with its strategy and this is evident from its recent financial performance. That said, while promising, investors need to be aware that Fastly might have trouble matching recent performance as the world emerges from the pandemic. The share price is also quite frothy, par for the course for high-growth companies. Expectations are high and if the company does not maintain its 40%-plus growth, the price may fall.

Disclosure: On the date of publication, Steve Auger did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

If Edge is Becoming More than Just a Buzzword, Digital Realty Needs to Find a More Formal Way be There.

On March 17th, Digital Realty announced it had completed the sale of 11 data centers in Europe to Ascendas REIT.  In US dollars, the price of $680MM representing an EBITDA multiple of ~17x based on most analysts’ estimates. This divestiture was already factored in Digital’s 2021 guidance – so  (putting on my old analyst hat) there should not be a big change to numbers (which optically is always a very good thing for a stock price!).

This ‘capital recycling’ as it is called is NOT a new part of Digital’s playbook.  They have done this successfully in the past (including with the recent Mapletree JV deal).  While some of this capital will go toward de-leveraging, M&A is an integral part of Digital’s DNA (recall – their CFO was a top banker in the space before joining the company).  The big bet is they are able to deploy this capital and realize a higher cap rate than what they were getting from these divested assets (~6%+).   So the key question is where do they go?   While there are geographies which Digital likely wants to increase their presence (greater exposure to India has always been a point of discussion) – a recent blog post by them may offer some clues.

Specifically, in its Blog post in late January (LINK HERE: https://www.digitalrealty.com/blog/how-data-gravity-digital-transformation-and-hybrid-it-will-define-2021) Digital spoke much about the Edge and the need for “re-evaluation of architectures.”  Driving these trends are the shift to “data localization” (think GDPR) and need for “cyber-physical security.”    The ‘money quote’ which jumped out to us in the write up was: “Connected devices at the edge are predicted to generate more than 79 zettabytes of data by 2025—5x higher than the amount generated last year.”

We agree with this view and its impact on the industry.  One has to wonder if Digital is thinking more formally as to how it will develop this edge play.  With almost a third of Digital’s revenue coming from cloud players, Digital will need to have some sort of ‘pitch’ as to why it can further help its customers with this path.  Microsoft, a top customer for Digital, just recently introduced “Azure Precept” at its Ignite event. Thus, to say the Edge is top of mind to many of these CSPs is indeed an understatement.

If Edge is becoming more than just a buzzword, Digital needs to find a more formal way be there.  The task is not too large for them.  Digital has been a company in enormous transition in the past five years. Remember, it  used to be known as  ”just a space and power” company a few  years ago.  But it pivoted to connectivity and now has 164,000 cross connects.   While much of this was due to the InterXion acquisition, it went  to where the proverbial hockey puck continues to be going.

Like other capital recycling moves Digital has made in the past, this one last week in Europe was a concerted effort to rationalize their more mature assets and use the proceeds from that to make forward-looking chess moves in this space!  My bet is that next chapter will somehow involve the all-important  Edge.  To be a fly on the wall of Digital’s business development teams’  Zoom calls (or should I say Microsoft Teams calls!?) would be very interesting right now that is for sure……

 

 

InfraTech SPAC Raises $250M in IPO, Plans Digital Infrastructure Deals

Source: Datacenter Frontier

There’s a new public company shopping for a $1 billion acquisition of a digital infrastructure company. InterPrivate IV InfraTech Partners Inc. raised $250 million in its IPO Friday on the NASDAQ market, and will operate as a special purpose acquisition corporation (SPAC), with a large blank check to go shopping.

The InfraTech SPAC’s leadership is packed with veteran executives from the data center, telecom tower and hardware sectors. The CEO of the new company is Kevin Timmons, who led the buildout of hundreds of megawatts of data center capacity for Microsoft and CyrusOne. Former CyrusOne CEO Gary Wojtaszek and data center design pioneer Peter Gross are co-founders and board members for InfraTech, whose leadership also includes co-founders of American Tower Corp. and Barracuda Networks.

In the company’s debut at the NASDAQ, Timmons said the InfraTech fund intends “to change the world by turbocharging the growth of critical technology through a business combination in the ever-expanding digital infrastructure space.”

InterPrivate is an active player in the use of SPACs, investment vehicles that raise capital from investors for the purpose of acquiring a private company. InterPrivate IV InfraTech Partners Inc. is one of four SPACs sponsored by InterPrivate to capitalize on investment trends. It will trade on the NASDAQ under the symbol IPVIU, and its units opened trading Friday at about $10 a share.

The InfraTech SPAC is the latest example of the huge investment flowing into the data center sector, with global financial players raising billions of dollars in capital to fuel the data economy.  InterPrivate assembled a team of experienced executives to capitalize on this trend.

“We believe that several secular trends exist that will continue to drive a relentless demand for increasing growth of the world’s digital infrastructures,” InterPrivate said in an SEC filing. “We intend to seek digital infrastructure companies that are on what we believe to be a promising growth path, driven by a sustainable competitive advantage, with significant opportunities for acceleration by a partnership with us.”

The InfraTech fund said it will “focus on target companies with an enterprise value of $1 billion or more” in the technology, media and telecom infrastructure sector. But the initial acquisition could be just a first step towards larger M&A ambitions.

“We intend to seek companies that can serve as a platform for future synergistic acquisitions,” InterPrivate says in its SEC filing. “We will actively seek opportunities to combine businesses that can expedite each other’s growth, either through complimentary technology offerings or through geographic scale, as well as businesses that offer the potential to expand services to underserved markets, geographies, and/or demographics.”

More SPACs Means More M&A

SPACs can provide a quick route to the public securities markets for privately-held companies in the digital infrastructure sector. This has been the case in two data center M&A deals:

Successful Cloud Service Providers and Managed Service Providers need to be out in front of everything in their managed data center spaces – ensuring uptime, bandwidth, and operational/cost efficiency today, with the flexibility and scalability to adapt and expand on the fly. Physical layer and  infrastructure is the foundation on which those services are built. Get the new data center ebook from Siemon that explores pro tips and best practices for physical layer strategies for cloud and managed service providers, from zone cabling in the colocation data center to high speed interconnects in the data center

The formation of multiple SPACs appears likely to boost the number of publicly-held companies focused on digital infrastructure. Increased data center M&A was one of the trends DCF highlighted in our annual forecast, Eight Trends That Will Shape the Data Center Industry in 2021.

InterPrivate believes it has lined up a team with the experience and connections will make the InfraTech fund an attractive partner. “We believe that our team’s extensive experience in designing, building, operating, and automating some of the world’s largest digital infrastructures will make us the partner of choice for companies looking to capitalize on this opportunity,” the company said.

Timmons has designed, built, and operated some of the world’s largest technology infrastructures. He led Microsoft’s global data center team as General Manager of Data Center Services, refining the company’s data center network, introducing a lightweight modular data center design. At CyrusOne, he led a “massively modular” design that helped the company win hyperscale deals. Timmons was also employee number four for GeoCities in 1996, serving as Director of Operations for the early web site platform.

Bluebird Network expands fiber access in Midwest to support 5G

Source: RCR Wireless News

Bluebird will deploy fiber to over 500 cell towers

Regional operator Bluebird Network plans to extend fiber access to more than 500 towers in order to support the expansion of 5G networks in a number of markets in Oklahoma, Missouri, Illinois, Iowa and Kansas.

“The 5G movement is underway, and Bluebird plans to be a major player in enabling its rollout and subsequent adoption. Our commitment to deploy fiber to over 500 towers will further strengthen Midwest businesses and residents with enhanced network access to leverage the latest technology driving digital transformation,” said the company’s President and CEO Michael Morey in a press release. “We understand these connections are no longer a luxury, they are a necessity for businesses. Many applications require low latency to ensure optimal performance, requiring a concerted effort to move access closer to end-users. Bluebird is stepping up its network capabilities to ensure the communities we serve have the connectivity needed to embrace the digital economy.”

Headquartered in Columbia, MO, Bluebird Network has more than 9,800 fiber route miles in more than 60,000 on-net and near-net buildings and 151 points of presences in the Midwest. Last year, the company completed a 61-mile expansion in Springfield, MO in January, followed by a February fiber expansion in Jefferson City, MO. The following month, Bluebird completed its acquisition of the Illinois Network Alliance (INA).

The carrier, at the end of 2020, also acquired the ColoHub Data Center from Geneseo Communications, located in Bettendorf, Iowa.

“In 2020, we expanded and densified our fiber network infrastructure across several territories throughout the Midwest,” Morey said of the data center acquisition. “Expanding our data center offerings, fortified now with a second facility, is part of our mission to empower businesses and offer a total communications solution.”

HORIZON ACQUIRES INFINITY FIBER, LLC

Source: Horizon Connects

COLUMBUS, Ohio – March 2, 2021 – Horizon has acquired Infinity Fiber, LLC, anchoring the continued expansion strategy into Indiana. The acquisition provides connectivity to multiple data centers in Indiana and augments Horizon’s existing fiber infrastructure in downtown Indianapolis and Bloomington, Indiana.

Infinity Fiber’s long-haul network adds about 450 route miles to Horizon’s existing 4,500 miles of fiber. Horizon can now offer connectivity on a unique fiber route from Chicago’s 350 E. Cermak data center to South Bend, Indiana and Indianapolis, which will tie back to Horizon’s fiber backbone in Columbus, Ohio.

“Horizon is excited about acquiring Infinity Fiber to further cement our market expansion plan for Indiana,” said Jim Capuano, Chief Executive Officer for Horizon. “The Infinity network complements our existing fiber assets in the Indianapolis market, while also providing native connectivity to the region’s data centers. The combined network assets accelerate our plans for Indiana significantly. Our aggressive strategy for expansion and innovation is what has made us a premier fiber-optic broadband partner, and we continue to take the next steps to grow our high-quality, highly reliable services across the Midwest.”

Horizon will be offering speeds up to 400 Gbps, and soon, 800 Gbps across its entire network, including connectivity to Chicago and data centers in between, for carrier and enterprise customers, along with fiber connectivity in and around buildings throughout downtown Indianapolis.

“This unique asset is a game changer for our presence in Indiana,” commented Glenn Lytle, Chief Revenue Officer for Horizon. “We’ll be able to better serve our wholesale and carrier partners with a unique fiber route from Columbus, Ohio through Indianapolis to Chicago, as well as offer downtown Indianapolis enterprise customers direct cloud connectivity, Internet, Ethernet, and Hosted Voice products over our first-class fiber network.”

The acquisition has closed, and Horizon anticipates the network to be ready for services by Q2 2021. Partners looking to inquire about the network or services available are encouraged to visit HorizonConnects.com or email FiberSalesLeads@HorizonConnects.com.

ABOUT HORIZON

Horizon is a facilities-based, fiber-optic broadband service provider based in Ohio with expanding services across the Midwest. Operating 5,000 route miles of fiber, Horizon provides high-quality connectivity solutions for small to large enterprise and wholesale carrier customers, where high-reliability and high availability are critical.

The extensive network offers high speed Ethernet, Dedicated Internet Access, Hosted Voice and UCaaS, dark fiber, wavelength, and data center connectivity services. Horizon partners with carriers, government, healthcare, education, and enterprise businesses offering flexible and customizable fiber network solutions with a remarkable commitment to customer care and cutting-edge fiber-optic technology. For more information, visit horizonconnects.com.

ABOUT NOVACAP
Founded in 1981, Novacap is a leading Canadian private equity firm with $2.6 billion of assets under management. The firm’s unique investment approach, based on deep operational expertise and an active partnership with entrepreneurs, has helped accelerate growth and create long-term value for its numerous investee companies. With an experienced management team and substantial financial resources, Novacap is well positioned to continue building world-class companies. For more information, please visit www.novacap.ca

Digital Colony Swallows Boingo Wireless for $854 million

Source: Capacity Media

Mobile infrastructure and wifi company Boingo Wireless is to become part of Digital Colony’s empire, which already includes FreshWave, Highline do Brasil and 50% of Zayo.

The private investor said yesterday that it will pay US$854 million for the company, and added that it will “continue investing in Boingo’s diverse network”.

Boingo CEO Mike Finley (pictured) said the deal “will deliver significant and immediate value to Boingo’s stockholders and concludes a robust strategic review process undertaken by Boingo over the past year”.

He added: “We believe Digital Colony’s expertise owning and operating digital infrastructure businesses, combined with its relationships, resources and access to long-term, private capital markets, will provide greater flexibility for Boingo to continue advancing its business strategy.”

The two sides said they expect the transaction to be completed quickly, in the second quarter of 2021.

The announcement came as Boingo, which is Nasdaq-listed, said revenue had declined 10% to $237.4 million in 2020 compared with the previous year, but adjusted Ebitda rose 1% to $83.5 million.

Boingo Wireless is in a similar market to Digital Colony’s London-based FreshWave, a unified brand adopted in January 2020 for three acquisitions, StrattoOpencell, iWireless Solutions and Spyder Facilities, bought between August 2018 and June 2019.

FreshWave, like Boingo, builds and operates wireless infrastructure, using technologies and infrastructure solutions including indoor and outdoor distributed antenna systems (DAS), small cell networks and macro cell towers.

Boingo reported yesterday, with its annual results, that it has completed a restructure into separate business areas.

Carrier services reported revenue down 7.0% to $107.7 million, with profit margin down from 44.4% in 2019 to 37.0%.

Military revenue of $76.8 million was up 2.5% compared to 2019, with a gross profit margin of 76.2%.

Boingo’s private networks and emerging technologies unit recorded revenue of $2.2 million, an increase of 10.4% on the previous year. Its multifamily unit revenue was $21.6 million, a decrease of 13.8%. Legacy revenue was $29.1 million, a decrease of 36.7%.

Finley reported: “The headwinds resulting from Covid-19 accelerated the anticipated decline in our legacy retail and advertising products as well as delayed progress on several projects into 2021.”

But he noted new business. The company signed a tier 1 carrier to a branch of the New York Metropolitan Transportation Authority (MTA) Long Island Rail Road, and “we signed a Wifi offloading contract with a Tier 1 carrier to begin to utilize Boingo’s Wifi footprint.”

He said that, following the Digital Colony acquisition, “our team at Boingo will continue to execute our strategy with access to more capital and resources to expand our network and robust suite of products and services. Following a year-long formal strategic process through a once-in-a-century pandemic, we could not be more thrilled with the outcome which we believe maximises value for our stockholders.”

Digital Colony, led by Marc Ganzi, and Swedish investor EQT infrastructure completed their $14.3 billion deal to buy Zayo in March 2020.