The Impact of Private Equity on the Finnish Tower Market
Venäläinen, Tero (2024)
2024
Johtamisen ja tietotekniikan DI-ohjelma - Master's Programme in Management and Information Technology
Johtamisen ja talouden tiedekunta - Faculty of Management and Business
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Hyväksymispäivämäärä
2024-09-05
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:tuni-202408128065
https://urn.fi/URN:NBN:fi:tuni-202408128065
Tiivistelmä
The global tower infrastructure market has seen significant evolution in recent years driven by digitalization and technological advancements, necessitating substantial investments in tower assets. Private equity (PE) firms have increasingly played a role in this sector, capitalizing on opportunities presented by the divestment of tower assets by mobile network operators (MNOs) and the emergence of neutral tower companies. These global trends are now increasingly influencing the Finnish market as well. This study explores the motivations behind PE investments in Finnish tower infrastructure and investigates the methods used by PE firms to create value within their portfolio companies in Finland.
Through qualitative research methods, including in-depth interviews with industry experts familiar with both PE and the Finnish tower market, this study addresses two primary research questions. Firstly, it examines the factors influencing PE firms' decisions to invest in tower infrastructure as an asset class and the specific factors behind investing in the Finnish tower market. Secondly, it analyzes the value creation strategies employed by PE firms in Finland.
The results show that PE firms active in the Finnish tower market show considerable heterogeneity in their investment strategies, reflecting varying time horizons, operational involvement, and approaches to value creation. PE firms act as value creators for their portfolio companies by employing various strategies tailored to specific cases. These strategies fall into three main categories: directly improving the company's operations, indirectly enhancing its value through external factors, and capturing maximum return upon exiting the investment. To achieve this, PE firms leverage their expertise in operational efficiency, financial engineering, and good corporate governance. The extent to which these strategies are implemented within specific portfolios heavily depends on the overall investment strategy of the fund and the specifics of the portfolio company. Financial aspects are overall considered the most critical, with particular emphasis on PE’s role in alleviating capital constraints inherent in an MNO-controlled market. The results also indicate that the Finnish tower market is a highly developed and effectively functioning market and attracts significant interest from the PE sector. The regulatory environment in Finland is found attractive to external investors. The current high market competition and overall stability suggest it is unlikely to shift towards a directly regulated market. Therefore, it is expected that PE involvement in the Finnish tower market will continue to increase in the future.
Through qualitative research methods, including in-depth interviews with industry experts familiar with both PE and the Finnish tower market, this study addresses two primary research questions. Firstly, it examines the factors influencing PE firms' decisions to invest in tower infrastructure as an asset class and the specific factors behind investing in the Finnish tower market. Secondly, it analyzes the value creation strategies employed by PE firms in Finland.
The results show that PE firms active in the Finnish tower market show considerable heterogeneity in their investment strategies, reflecting varying time horizons, operational involvement, and approaches to value creation. PE firms act as value creators for their portfolio companies by employing various strategies tailored to specific cases. These strategies fall into three main categories: directly improving the company's operations, indirectly enhancing its value through external factors, and capturing maximum return upon exiting the investment. To achieve this, PE firms leverage their expertise in operational efficiency, financial engineering, and good corporate governance. The extent to which these strategies are implemented within specific portfolios heavily depends on the overall investment strategy of the fund and the specifics of the portfolio company. Financial aspects are overall considered the most critical, with particular emphasis on PE’s role in alleviating capital constraints inherent in an MNO-controlled market. The results also indicate that the Finnish tower market is a highly developed and effectively functioning market and attracts significant interest from the PE sector. The regulatory environment in Finland is found attractive to external investors. The current high market competition and overall stability suggest it is unlikely to shift towards a directly regulated market. Therefore, it is expected that PE involvement in the Finnish tower market will continue to increase in the future.