Big Gap in Valuations Puts Private Companies in Broadband Catbird Seat

Key Points

• The valuation gap between private communication companies – which operate mostly in rural and tier three cities – and public cable companies is the widest we’ve ever seen.
• EBITDA valuations for private companies (based on recent transactions) are over two times higher than the average valuation for the main publicly traded cable companies. An EBITDA valuation is considered a proxy for a business’ possible sale price.
• Several factors are driving this gap, including public equity market dynamics, competition from the large telcos, an attractive competitive environment and growth prospects for private investors, and the unprecedented amount of federal dollars allocated to bridge the digital divide.
• Given the headwinds facing publicly traded cable operators and the tailwinds for their private counterparts, the valuation gap will likely persist for the foreseeable future. This puts many independently owned rural communication providers in the catbird seat when it comes to strategic partnerships and/or outright sale.

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