John Hancock Life Insurance Company is leading a consortium that will acquire 30 percent of ExteNet Systems. The long-term institutional investor will join existing major investors, Digital Colony and Stonepeak Infrastructure Partners.
PJT Partners served as financial advisors to ExteNet and its existing investors. TAP Advisors served as financial advisors to John Hancock. Simpson, Thacher & Bartlett provided legal representation to ExteNet, and Paul, Weiss, Rifkind, Wharton & Garrison represented John Hancock. The transaction is subject to regulatory approval. Financial terms of the transaction were not disclosed.
In addition to joining the company’s board of directors, John Hancock has committed to funding ExteNet to grow as a provider of indoor and outdoor wireless and fiber connectivity as the company scales for 5G network densification and addresses advanced connectivity needs of mobile network operators (MNOs), carriers, property owners and enterprises.
Speaking of the consortium taking an equity position, Jim Hyde, president and CEO at ExteNet, said it gives ExteNet even greater access to high-quality capital that will enable ExteNet to continue to invest and grow its business and deliver great indoor and outdoor networks for its customers. “John Hancock is a great partner in the digital infrastructure space,” he said. “They certainly see their investment in ExteNet as an opportunity to continue to realize a strong return on their capital. It’s a validation of our business model.”
The John Hancock investment is part of the rotation from other traditional asset class investors into infrastructure, Hyde said.
“The fact that a life insurance company has an investment unit that is dedicated to infrastructure assets is a relatively new phenomenon,” he said. “What you are seeing is greater access to capital by infrastructure companies such as ours.”
Hyde said the capital is needed to fulfill the demand for 5G networks, both traditional outdoor small cell business and expanded indoor 5G connectivity, including the edge.
“The facet of our business that is poised for exponential growth is the edge, he said. “Think about the way that our indoor and outdoor DAS and small cell business is architected. Edge becomes increasing important.”
Hyde said ExteNet is well-positioned to help its customers execute their edge strategies. A report by Meticulous Research on global mobile edge computing forecast that the market will grow at a CAGR of 30.1 percent from 2020 to 2027 to reach $2.8 billion by 2027.
“As 5G is built out, the edge becomes an increasingly important part of that long-term, next-generation network architecture,” he said. “All of the 5G applications that you have heard about require IoT – the infrastructure of things. It is the network infrastructure that we deliver, including fiber connectivity, vertical real estate, small cell connectivity and indoor networks – public and private.”
Private networks are also becoming much more important, according to Hyde. “The just completed CBRS auction had some very interesting winners, and we have some very interesting projects underway with private LTE and private 5G networks across the country,” he said.
With the introduction of the Apple 12 5G handset, carriers are “chomping at the bit,” as Hyde put it, to accelerate 5G deployment now that there will widespread availability of 5G devices.
The delays and cancellations of public events caused by COVID-19 have had one silver lining, according to Hyde, allowing the completion of 5G network upgrade inside the Dallas Cowboy’s AT&T Stadium. It was completed in 18 weeks in time for the team’s home opener and included additional cabling and many new nodes required for densification. It is now the largest indoor deployment of 5G in the world.
The focus for 5G indoor deployments will go beyond the iconic venues to include all buildings. It requires more buildings to receive coverage from the inside out as opposed to from the outside in.
“The way 5G is being deployed with mid-band and high-band spectrum drives demand for more indoor venues to have upgraded networks deployed in them,” Hyde said. “You have to bring the signal source inside, because those radio waves will not penetrate buildings. The need to deliver public, commercial-grade 5G service is going require that signal indoors in more buildings.”
Carrier-funding is still the primary driver for indoor wireless deployments, but noncarrier-funded deployments are becoming more prevalent, according to Hyde.
One of the lessons of the COVID-19 pandemic has been that many buildings are not equipped to provide smart building applications, such as keyless entry and health screening, to their tenants.
“Real estate owners and investors understand the importance of wireless to compete in the marketplace, he said. “We are seeing a lot of demand developing around nonmobile network operator-funded networks and applications in buildings.”
There has been a lot of talk about the effect of the pandemic in terms of office building usage. “No one knows what the new normal will look like post-COVID,” Hyde said. “We do know that next generation indoor wireless infrastructure is going to be required to deliver high speeds and low latency, whether it is an office building or multitenant housing.”
COVID has also affected the geography of the densification, which usually begins in the urban core and then moves outward. “COVID has accelerated broadband demand in the secondary and tertiary markets, and we are now a couple of years ahead of our original plan in terms of working with the carriers to begin deployment in these markets,” Hyde said.
Small cell upgrades are also benefiting from the availability of multiple-input multiple-output (MIMO) antennas, which were previously giant panels for macro towers. “The new MIMO for small cell technology would blow you away,” Hyde said. “We are beginning to deploy it in one carrier’s 5G small cell densification. The expectation is high.”
When the dust settles on 2020, ExteNet will have deployed a record number of outdoor small cells. The company also set a record in 2019. And there is plenty of small cell business in the pipeline for future years.
“Now that we will have 5G handsets in the hands of millions of users in the next year, the race really begins,” Hyde said. “Before, it was marketing race, but now, the rubber hits the road. We will finish 2020 in great shape and with great momentum going into 2021.”