Over the past several years, the telecommunications sector has become a popular addition to many private equity (PE) portfolios. Investment in telecom infrastructure increased by as much as 15% from 2019 to 2020, accounting for 35% of private equity deals in the US during that period.
Telecom and finance expert Michael Meekins has more than a cursory knowledge of these developments. The co-founder, president, and CEO of the PE firm, Westbridge Capital Ltd., Meekins has long had a front-row seat to the transformation and ongoing shift of PE strategy toward telecom investment.
Why PE is Turning Toward Telecom Investment
The shift toward telecom is fueled by many factors, most notably the skyrocketing demand for data and low interest rates. Since the introduction of 2G technology in the early 1990s, the demand for mobile connectivity has increased sharply with no sign of let-up. And with 5G, the clamor for even more bandwidth is higher than ever.
Like many technologies, the Internet of Things (IoT) started out as a primarily consumer-driven technology. However, industry stakeholders now anticipate the connection of billions of IoT devices to wireless networks over the next several years, further increasing the demand for data and bandwidth.
For seasoned PE specialists such as Michael Meekins, these developments provide valuable lessons for investors intending to scale businesses.
The Profitability of Telecom Investment
It could be argued that telecom investment makes little sense over the short term as the market’s maturity tends to limit opportunities for organic revenue growth. Furthermore, the financial resources necessary to set up or replace infrastructure can be prohibitive.
Nevertheless, telecom investment offers many profitable opportunities for PE funds. Here are some reasons why telecom investment makes sense from a PE standpoint along with business scaling lessons that can be learned from such partnerships:
Leveraging Growing Market Needs
Private equity can learn valuable scaling lessons from telecom’s rapid growth. Investing early in promising ventures offers a competitive edge, with low interest rates making long-term plays even more attractive.
Building Businesses That Thrive Through Market Cycles
Telecom infrastructure offers private equity stable, long-term growth with low risk. Even in downturns, demand remains strong, and customer retention is high. Drawing from first-mover advantages in 5G and fiber, PE firms can modernize infrastructure, attract new segments, and secure sustained returns in a sector with high entry barriers and minimal competition.
Optimizing Operations for Scalable Growth
Private equity firms bring industry expertise, enabling cost control, efficiency, and execution strength. In telecom, streamlined management, modernized systems like OSS and BSS, and data-driven strategies improve service quality and operations. Strong governance and benchmarking further enhance performance, maximizing value and long-term profitability.
Business Scaling Lessons From the Telecom Industry
As a telecom professional, Michael Meekins advocates for the leveraging of budding industries’ strong growth potential by investing during periods of low interest rates, thereby reducing financing costs. Taking advantage of rapid technological advancements can also create opportunities to attract new consumers, thus expanding revenue streams.
Based on the industry’s history and current projections, the consistent demand for connectivity offers long-term profit potential for telecoms, making it a resilient investment choice. By learning from the business scaling lessons provided by the industry, PE firms can mitigate risk while capitalizing on evolving market trends.
