Rural Broadband Valuation Remain High as Investors Move Down Market for New Opportunities

This report looks at the current state of the broadband mergers and acquisitions market including valuations, target companies, market catalysts, risks, and the impact COVID-19 could have on new sources of government funding. Key findings:

• The abrupt shift in 2020 to working from home and remote learning has significantly increased high-speed data subscriptions, representing a new catalyst for the broadband market.
• COVID-19 has exposed the vulnerability of the underserved and unserved, and as a result, Democratic lawmakers have proposed an $80 billion plan to bridge the digital divide. The possibility of new government grants will whet investors’ appetites for broadband assets.
• Investors are starting to show interest in Wireless Internet Service Providers (WISPs) thanks to their Connect America Fund Phase II (CAF-II) awards, new spectrum-sharing business models, and fiber investments.
• While the high-speed low Earth orbiting satellite market represents a long-term headwind for valuations and M&A activity, we remain skeptical until the business model is proven.
• Given these and other factors, we believe current broadband valuations should remain elevated for the foreseeable future.