Hi guys - first time posting here. I have an upcoming case study / modeling test with a specialized private equity fund. I was told the case study / modeling will be for a mobile tower LBO. Unfortunately this is a field that I don't have experience in, can anyone provide insight into what to expect? (or if you have any case studies that you could share???)
Thanks for the help in advance!!
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I don't have any case studies to share but this type of business is extremely similar to real estate and generally not too hard to get your head around. So, you got lucky! I would first try to understand single unit economics: a single tower typically has 5-6 tenants (mobile operators) when fully occupied. Sometimes there are fewer tenants, and getting additional ones is a source of potential upside. Contracts are transparent, multi-year, with pre-agreed fixed price increases. There is a fairly clear maintenance capex outlay requirement. Operating costs are also transparent and fairly modest. If there is a roll-out, try understanding the capex requirement to build an additional tower and then figure out by when it could be fully occupied (think multi-tenanted real estate, basically). Overall, it is a stable business with predictable cash flow, which is perfect for an LBO.
I would look at public comps - either American Towers (developed markets), or Helios Towers (somewhat recent IPO in emerging markets, so there could be good broker initiation reports). Operating costs for these kinds of businesses are higher in emerging markets because sometimes there are physical security guards on duty protecting the towers from equipment theft. Another thing to keep in mind is that the multiples generally paid for these businesses across the world are very high, due to the infrastracture-like nature of the asset.
Good luck,
Tamara
Thanks Tamara! This is super helpful!
This comment is money.
Only thing I'll add is that instead of EBITDA, frequently used metric is TCF - tower cash flow.
Look at Cellnex as well
In addition to Tamara's comments above (with which I concur 100%) check out the following link from American Tower Corp.... potentially some useful '101' information for you:
https://www.americantower.com/investor-relations/investor-presentations/
To the extent you have time (in preparing) see if you can get your head around the nuances of revenue growth that does not require additional capex (ie filling up unused "tenancies" in existing towers), and revenue growth that does require additional capex (ie revenue that requires the construction of new towers)... The trick here is that revenue (and hopefully bottom line) growth, beyond the filling up of existing tower capacity, requires supporting growth capex so ideally you can provide a logical explanation for how you have "sized" the revenue for a given amount of "growth capex" (or sized the capex for a given amount of additional revenue).
Hope this helps
Cheers
There is also a very detailed equity research report by RBC on Communications/Infrastructure - issue date is April 14 2016. Probably an overkill for interview prep purposes (suspect the American Tower docs are sufficient), but if you're interested and have access to it....
Cheers
Thanks so much !!! I took a look at American Tower's presentations, they're definitely a good starting point to get acquainted. Again, thank you !
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