Vertical Bridge ramps up M&A push

As the USA’s largest private tower company, Vertical Bridge is well-positioned to take advantage of the soaring demand for data at the dawn of a new 5G era. Over the past 12 months, the company has doubled down on further investment and the build out of new sites across the US.

Talking to Thomas Simpson of TMT Finance, Bernard Borghei, EVP of operations and co-founder, Vertical Bridge said that 2019 will see the towerco increase its focus on organic growth and acquisitions to further cement its position in the market.

2019 will be more of an acquisition year for us,” says Borghei. “We built more towers last year than ever before and while we have no plans to slow down our BTS business, we do see more favourable market conditions for acquiring towers than there were last year.”

Vertical Bridge has remained consistently active across the developing communications infrastructure space, and following a long-term investment from Canadian institutional investor Caisse de dépôt et placement du Québec (CDPQ), shows no sign of slowing down. Acquiring a 30% stake in the main operating subsidiary of Vertical Bridge, CDPQ joins other Vertical Bridge investors including Digital Bridge, Goldman Sachs Infrastructure Partners, Stonepeak Infrastructure Partners, The Jordan Company and others. The Vertical Bridge executive team also retains a significant stake in the business.

Uncovering investment opportunities

Acquiring sites from AT&T, Alpha Media, Alaska Wireless Network, IHM, Nsight Tower Holdings, TDS and US Cellular since its founding in 2014, Vertical Bridge operates a strict and measured investment strategy. CEO and co-founder Alex Gellman told TMT Finance that location, leasing opportunities, and the tenants, remain key to how Vertical Bridge assesses consolidation avenues. To date, the company has deployed over US$2bn and Gellman sees this number doubling in the near future.

CDPQ has been very clear that it wants to invest more. We already have a sizeable warchest and we can now call on CDPQ too. We are also relatively lightly levered, compared to a lot of the other private companies. We don’t feel constrained going after any asset we want to buy,” says Gellman.

“The investment from CDPQ allows us to be even more flexible than before,” added Borghei. “It’s long-term capital that will allow us to grow more, be more creative and bring an added value to each deal and to each client we have.”

And even more investment opportunities are on the horizon, with 5G edging closer.

“The carrier capital spend to deploy 5G will be tremendous and will require significant comms infrastructure investment – this generally implies scale,” says Gellman. He adds that there will be an infrastructure-focused wave of consolidation in order to build bigger and stronger vendors. 

Higher valuations, more competition

Infrastructure funds, as well as pension funds – CDPQ, notably – and sovereign wealth funds are increasingly prevalent in the comms infra space, injecting capital into asset classes where their names were previously unheard.

“Names will change, as shown with the current influx of new capital. The industry has evolved beyond its private equity-driven history. It will continue to shift,” says Gellman.

New names and new money do not necessarily equate to sensible and reliable investing though. Borghei states that the management teams that can exercise intelligent investment execution – via a detailed business plan – will triumph.

He says: “There is a lot of money. Funds and firms are entering the industry because it is such a hot sector but it is going to come down to how you are going to differentiate yourself in this space, and the execution of the business model has become a key differentiator.”

There is a steady influx of investors that are comfortable in the communications infrastructure sector, and that keeps growing and driving a lot of the public stocks in the sector – especially towers, says Gellman. He adds that the stakes are higher and when “playing with a high multiple, you have to be able to execute and drive it down over time because you can’t expect multiple expansions to drive value.”

Beyond competition

Vertical Bridge is the largest private tower company in the US and it continues to eye expansion. Jostling alongside the power of the three public tower companies in the US, the company has diversified and sought to stay one step ahead of competition.

“We try to be fast, flexible and friendly with customers, which gives us an advantage over the public companies and we can beat the private companies through our scale,” notes Gellman.

The company capitalises on its strong bonds with backers like Digital Bridge. This relationship in particular has given Vertical Bridge visibility on other communications infrastructure assets – both in the US and globally, enabling the company to learn from what is going on internationally and cherry-pick from strategies and the diversified experience at a finger’s reach.

Gellman expects more of the same from Vertical Bridge as they keep growing.

“We’re going to continue to look at the market and find the best way to execute, whether that is building towers, buying towers or both,” he said. “We’re going to focus on anticipating our customers’ needs and building a portfolio that meets those needs. We’re going to allow ourselves to be flexible, rather than adhering to a strict, one-lane strategy.”