Jennifer Fritzsche is currently a Senior Industry and Innovation Fellow at the Center for Business and Public Policy at Georgetown University.

Ms. Fritzsche was formerly a Managing Director at Wells Fargo Securities focused on telecommunications services (wired and wireless), and cable, data center, and tower sectors. She had been in this role at Wells Fargo since 1995. She provides differentiated, relevant industry views, detailed financial and valuation models, deep market insight, and highly respected investment opinions to the money management community.
A frequent guest on CNBC, Bloomberg TV and at industry conferences, Ms. Fritzsche has had a career in providing thought leadership, strategic vision, and business insight leading to significant business growth and shareholder value. She and her team have done much work on the topic of 5G and the infrastructure needed to support this service.

Fritzsche’s Forum

February 23, 2021

The SPAC is back!  That is the headline that has tapped into MAJOR talk time on CNBC of late!  It seems like every day there is a CEO of a new SPAC on there trying to talk up his / her new vehicle and why it should be a focus for investors.   But according to Data Center Frontier, the SPAC-attack is getting closer to our universe.  Specifically, there are two new SPACs where seasoned and tenured data center executives joined the C-Suite. 

Specifically, members of the former management team at CyrusOne will be joining the team at InterPrivate Acquisition Partners.  This SPAC is expected to focus on digital infrastructure.  Former CONE CEO (Gary Wojtaszek) has signed on as an advisor.  Additionally, Michael Tobin (from TelecityGroup fame) is reportedly working with an Amsterdam SPAC called Crystal Peak also  focused on the data center space.  Recall, under Tobin, TeleCity did numerous  acquisitions  (originally build from the ground up of three companies – TeleCity Limited, Redbus Interhouse Limited and Globix Holdings (UK) Limited) and became one of the largest independent data center operators in Europe before being purchased by Equinix in 2016.

While we agree that the non-stop SPAC train could be indicative of some of the “irrational exuberance” that Mr. Greenspan   so famously  spoke about in 1996, both Wojtaszek and Tobin have a reputation for strong  strategic vision and they predicted forward looking trends very well.  Remember CONE  ‘bear hugged’ the hyperscalers well ahead of many of their data center competitors.  And TelecityGroup was one of the early pioneers in the now extremely active European data center market (which we still estimate is two-three years behind the US and likely will be the region with the most data center growth over the coming year).   As a result, while the SPAC party is indeed a crowded one, the brain power coming with these two should not be overlooked. 

Listening to the great (and very wise) Colby Synesael  during his presentation at the Virtual Metro Connect show Monday (2/22) morning, it seems like there is much to wood to chop  in the data center M&A space to keep these SPACs busy.  For data centers specifically, even though the space has already seen a wave of intense M&A, there are still many targets out there.  These include (but are not limited to): Data Foundry, Telefonica LatAm Data Centers, Aptum Canada, TIM Data Centers, KIO Networks, INAP, Global Switch, Digiplex Nordic Data Centers.    To have the knowledge and operating experiences of these  teams may give a SPAC a leg up vs. some of the PE, Sovereign Wealth, Pension and Infra Funds who have a lot (a LOT) of capital but not a lot of experience navigating this complex and ever-changing space.

 

Previous Fritzsche’s Forum

February 15, 2021

One of the themes we have continued to write about is the blurring of the lines between the key pieces of Communications Infrastructure silos – towers, fiber, small cells and data centers. The first three of these pillars (tower, small cells and fiber) have been connected through numerous partnerships and mergers in recent years. But, for various reasons, the remaining pillar (data centers) has had more of a dotted line connecting it to the other three pillars vs. a straight line. We believe this will begin to change in 2021. It is already happening….

The recent announcement between Evoque Data Center Solutions and ExteNet provides one of many examples of what I believe we will likely see. Under the terms of the agreement, these two companies will form a partnership which will integrate ExteNet’s line of cloud and fiber network with Evoque’s infrastructure in 14 of its marquee data centers.

This will offer the data center customers in Evoque’s facilities several benefits. These include (but are not limited to): more affordable point to point connections, more services on a single consolidated bill, and access to ExteNet’s robust fiber backbone (note: we believe Extenet’s 200G [and ability to expand to 400G+] metro core fiber network is one of the most underappreciated aspects of this story). Most importantly this move lives up to the promise Andy Stewart (Evoque’s new CEO) and his team made to Evoque customers – an expanded offering of services. A man true to his word!

A writeup from a trade press rag in the wake of this announcement made a point that made me pause and think. It read: “As data from disparate sources continues to pile up in cloud and physical stores for enterprises, the networking involved often becomes more granular, with SPECIFIC requirements needing to be addressed.”

In data center land such services will be a key point of differentiation as more competition comes to the space. And as you layer in the topic of 5G (a topic which surprisingly is not often discussed on data conference calls) the above trade rag observation becomes even MORE true. Why? Because cloud customers will have a louder voice in 5G than they have in any other past ‘G’ evolution. And to say cloud companies’ requirements will be ‘specific’ is a huge understatement.

Evidence of the cloud players interest in telecom may be seen in Microsoft’s purchase of Affirmed Networks and Metaswitch Networks. With these assets added to Microsoft’s massive tech portfolio, it will be able to offer Azure customers the ability to run both telecom and networking services as well as connect to Microsoft’s own private 5G network. When a company whose equity value is twice the combined size of AT&T, Verizon and T-Mobile (who most consider the 5G players of today) is entering the 5G space you sit up and take notice!

We know how deep of a partnership Microsoft already has with third party data center companies today (as CyrusOne or Digital Realty if there is any doubt on that). That will only grow more as Microsoft gets into the 5G landscape.

With cloud companies being the largest customer segment in the data center sector – their needs will indeed get more ‘specific’. If those data centers companies broaden their services NOW – the roads those partnerships can take may resemble the seven lane highways of Atlanta (very broad) vs. a two-way country road (very narrow and somewhat boring!). This small alliance announced between Evoque and ExteNet represents one small step as to what we see as the beginning of many significant and ‘specific’ steps to make that now dotted line between data centers and the other pillars in the communications infrastructure space more a linear and straight one! It will be fun to watch that is for sure!

February 8, 2021

For Bucs or Chiefs fans, yesterday was a VERY big day….if you are Bears fan (like my house is) you are still wishing it was  January 1986!  While there is no Super Bowl shuffle for us this year – the game has got me thinking about how sports could change in the wake of 5G.  Hans Vestberg’s (Verizon’s CEO) keynote at CES last month ‘tackled’ (pun intended) this subject.  One thing was clear from that presentation 5G could dramatically the way the way people consume sports.  But what Vestberg didn’t touch on is how much it could transform the game itself. 

According to research from Vodafone Business, 30% of sports leaders believe 5G will have an impact on player performance.   While we know data analytics has been a ‘thing’ in sports for a while (Moneyball!) – 5G will help sports franchises increase the variety of data that can be collected. An example cited was that visual recognition algorithms could detect patterns of play and issue recommendations to athletes or coaches in REAL time. Wearables will play a huge role in gathering  data and allow for  new types of analysis. But this can only happen if data is collected immediately at the…..EDGE. 

One time I was traveling with a very wise CEO.  And I was yapping about how the edge this and the edge was that.   He just looked at me patiently.  Then he said….”OK here is a question….where is the edge of an autonomous car?”   I looked at him quite puzzled and then said – “My guess is at the base of a tower nearby?”  He just paused….and then said “No….the edge of the car is the car itself…that is where all the brains are….you should be focused on what is happening in Detroit more than anywhere else when studying that space.”    Hummm….ok makes sense. 

So back to football (baseball, basketball, soccer, pick your sport!) ….if all that data is going to be collected to show a player which run to make or which direction to pass the ball instantaneously….what is going to be the ‘edge’ point?  You got it….the stadium itself (remember the car)!  And what makes the stadium ‘smart’ enough to collect this data?     Yep….you guessed it….LOTS and LOTS of infrastructure at the point of play!  When talking about a specific venue like this – the two main ingredients are small cells and the necessary fiber to back up those up.

To that end, there has been a lot of questions about some players in the small cell space and if their strategy makes sense.  Crown Castle has caught the ire of an activist which made  public their questions about Crown’s small cell  strategy and plan.  However, on January 27th, something happened of which  people should take note.  CCI announced Verizon committed to lease 15K new small cells over the next 4 yrs.   There are 3 things notable about this: 1) this number represented half of CCI’s total small cell backlog  – prior to this announcement (so significant), 2) Verizon tends to be a first mover on networks…where they go others tend to follow, 3) it is often unusual for Verizon to allow vendors to actually announce partnerships in press releases….especially given Verizon has been saying for last few years that they could use their own fiber for small cells.  For them to admit they need Crown is a very rare thing! 

So for all these reasons – I think history will show that all the criticism of the Crown small cell / fiber strategy  may be a bit misplaced.  In my view, the “edge of the Crown” may be the sharpest and most interesting part of the beautiful structure!