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DigitalBridge’s LatAm plans include small cell expansions, new tower M&As

Bnamericas Published: Friday, November 04, 2022
DigitalBridge’s LatAm plans include small cell expansions, new tower M&As

US digital infrastructure fund DigitalBridge, whose Latin American portfolio comprises telecom towers, datacenters and also fiber, is seeing healthy opportunities in the future expansion of small cells in selected regional markets, namely Colombia and Chile.

The group is also mapping the market for potential new M&As in the macro cellular tower segment, as well as expansions with its own buildouts, particularly in key fast-growing countries in the region such as Brazil.

“We’ve started to see an uptick in small cell capex towards the back end of this year. There are a series of new requests for different city builds by all the carriers. The carriers for small cells have been doing a lot of self-performing in the past two years. We don’t think that makes sense for them going forward,” CEO Marc Ganzi told investors in an earnings call.

DigitalBridge is building small cells in Santiago, Chile, and Bogotá, Colombia in Latin America, as well as London and across the US, where all four carriers are investing in outdoor small cells, Ganzi said.

According to the executive, given macro tailwinds, with capex and liquidity constrained and interest rates rising, there will be a continued push by telcos to bet on outsourcing. 

Despite the positive prospects in this specific niche, however, DigitalBridge only sees small cells booming in 2024 or 2025.

“Small cells are difficult. You’ve got to hold a lot of whip on your balance sheet. It’s time-consuming, labor-intensive, and so we’re seeing a pick-up in outdoor backlog, particularly of Freshwave, which is our European business, and here in the US. We’re really optimistic about small cells in the long term,” Ganzi said.

He added said that Brazil has proven to be a very strong market for the company and that it will continue to invest heavily there inorganically through M&As, as well as organically. 

DigitalBridge’s Brazilian tower subsidiary, Highline, recently acquired a new set of towers from local carriers Algar Telecom and Oi. Rivals such as SBA have also made acquisitions in the country.

“In terms of organic growth, it [Brazil] is actually the second-fastest organic growth market for us – 10% organic growth this year. We’re very pleased with what’s happening in Brazil. We’re seeing a lot of good M&A opportunities, a lot of organic growth.”

DATACENTERS

On datacenters, the CEO said that Scala’s bookings increased over 166% year-on-year in 3Q22, outperforming DigitalBridge’s datacenter bookings in Asia (up 60% year-on-year) and North America (up 128%), and only behind Europe (220%).

On edge computing prospects, Ganzi said that the pipeline has been progressing.

“This notion of heaving highly interconnected datacenters on the edge is where you want to be,” although he did not provide specific insights for Latin American operations.

DigitalBridge has been betting on a greater diversification of its telecom infra portfolio and on a greater geographical reach, eventually through companies originally established in a specific market, as Scala or Highline in Brazil.

In an interview with BNamericas in September, Bernardo Vargas Gibsone, DigitalBridge’s new managing director and head for Latin America, said that the company was “assessing” alternatives in Uruguay. 

“Uruguay is a smaller country, but it also has high per-capita income and we want to see how to support this country in terms of infrastructure,” he said at the time.

The executive also singled out Ecuador as a country that the group was starting to look at. Other new markets of interest in terms of opportunities, albeit constrained by macro and political environments, are Argentina and Venezuela.

OPERATION AND FUNDING

DigitalBridge said it ended September with over 30,000 active tower sites, 100 datacenters, 135,000 route miles of fiber network, 100 edge facilities and 95,000 small cell nodes.

According to the company's executives, DigitalBridge has overall good liquidity and is looking for different sources of funding for its operations, including multilaterals. 

In Latin America, in particular, the group is now engaging with the OPEC fund for international development, revealed Ganzi.

The OPEC fund is a multilateral development finance institution established in 1976. Its 12 member countries are: Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates and Venezuela.

The talks with OPEC cited by Ganzi, therefore, matches Bernardo Gibsone's specific references to investment opportunities being considered in Ecuador and Venezuela.

At present, the group’s Latin American portfolio includes tower firms Mexico Telecom Partners (MTP), Andean Telecom Partners (ATP), and Highline, as well as datacenter firm Scala and fiber broadband company Mundo.

Scala had four operating hyperscale datacenters and another three currently under development in Latin America, as disclosed by DigitalBridge in June.

Tower company Mexican Telecom Partners (MTP), in turn, had 2,700 active sites and 3,100 total sites as of that month, while ATP had 3,500 active sites and 39,700 in total. Highline, for its part, had 5,000 active sites and 5,500 in total.

According to DigitalBridge, "active sites” represent owned and other revenue-generating sites, while “total sites” includes other sites in which the company has marketing/management rights. For DigitalBridge, “total sites” also include certain micro datacenters and IoT sites.

Chile-based Mundo, one of the group's newest acquisitions in the region, had around 3.4mn homes passed with fiber and 707,000 subscribers as of June.

Zayo, which although not a Latin American asset, does have investments in Mexico and Brazil, and had over 137,000 miles of fiber deployed in around 400 markets.

DigitalBridge has over US$48bn in assets and a portfolio of 26 companies.

In terms of asset types, the total investment portfolio is more or less equally divided between datacenters (30% of the total), fiber (30%) and towers (30%), with small cells at 10%.

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