Meridian Capital’s Telecommunications M&A Update covers the market impact of COVID-19 on telecommunications service providers and vendors.
The COVID-19 pandemic has driven Zoom video meetings from 10 million to 300 million sessions per day. Other video conferencing applications are likewise seeing greatly increased demand. The long-heralded vision that a substantial portion of employees will be working from a virtual home office has arrived, with Covid-19 exclamation points. Include streaming, cloud dependent apps, and traffic on virtual private networks, and it all adds up to greatly increased bandwidth demand.
Generally, the industry’s networks have held up well, with outages and slows remaining a rare occurrence. This is because carriers construct their networks to handle peak demand. Fortunately, there has been a balance between demand for streaming services and Internet surfing (mostly in the evening) and business usage (primarily daytime).
The 5G world ahead, with its huge bandwidth-eating applications, will place demands on many parts of the network beyond existing capacity. 4G or 5G, cable-TV, or fiber, all will need to be ready for this demand.
Most telecom businesses during Covid-19 have been designated as “essential.” This includes service providers, engineering and design firms, construction, and other businesses which are critical to the maintenance and expansion of the public networks.
Meridian surveyed vendors and service providers. Most service providers are handling increased requests for new and upgraded services; and reporting network traffic increases ranging up to 50% above normal.
Fulfillment firms, responsible for home and business installation and service, have added numerous Covid-19 protocols to protect employees and customers. In some cases, service calls requiring inside-the-home activity has been curtailed or streamlined; with the homeowner being directed to handle much of the inside requirement.
The installation and construction firms we spoke with all indicated they continue to be on or over budget for the year, with work in progress continuing unabated in most cases.
Some firms see Covid-19 fallout in the form of new business awards promised but delayed until later this year.
At Meridian Capital, we cover the telecommunications industry in which service providers and vendors will be increasingly important segments in the coming months and years. Private equity and strategic buyers are taking note of this fundamental shift in industry demand, and business owners and CEOs in the space are facing a critical strategic moment as the spotlight has been thrust upon their industry. Those who have a clear strategy and can prioritize the right growth initiatives will likely have access to capital to do so, as well as opportunities to grow inorganically through acquisition.