OVERVIEW
FOCUS Telecom Business Services Quarterly: Winter 2025 Report
After posting a strong performance in our fall reporting period, the FOCUS Telecom Business Services Index (TBSI) plummeted nearly 16% over the past three months. This significantly underperformed the returns of both the S&P 500 (up 2.1%) and the NASDAQ (up 6.2%) over the corresponding time frame.When viewed over the past 12-months, the TBSI is down 3.1%. Once again, this compares unfavorably to the broader indices. The S&P 500 is up 23.3% over the past year, while the NASDAQ is up 28.6%. Sector multiples closed out the period at 1.0x revenue and 10.5x EBITDA. Both of these are lower than year-ago multiples of 1.1x revenue and 11.6x EBITDA
The Distributors and Logistics Services sub sector was the culprit in the poor performance of the TBSI this period. The sub sector dropped 23.6% over the past three months, with every single stock in the sub sector in negative territory for the period.The sub sector is also down 20.1% year-over-year. Over this time frame, multiples fell from 1.3x revenue and 16.0x EBITDA down to 1.1x revenue and 12.9x EBITDA. In comparison, the 1.1% gain in the Telecom Engineering and Construction sub sector looked strong. Baran Group and MasTec both delivered double digit returns to push the sub sector into positive territory, while the other stocks in the sub sector traded down.The sub sector is also up nearly 50% over the past year. Sub sector multiples rose from 0.7x revenue and 6.7x EBITDA a year ago to 0.9x revenue and 8.0x EBITDA currently.
PUBLIC MARKET SUMMARY
Twelve Month Index Returns
Sector and Sub Sector Returns
Sector and Sub Sector Revenue Multiples
Sector and Sub Sector EBITDA Multiples
M&A Activity
The Telecom Business Services sector ended 2024 with a bang as the sector notched 24 total transactions for the period. This was nearly 40% of the total transactions for the entire year. On the downside, the total announced dollar value of transactions was relatively low at only $410 million. The Telecom Engineering and Construction sub sector accounted for only five of the period’s transactions, while the remaining 19 were in the Distributors and Logistics Services sub sector. For all of 2024, we counted a total of 62 transactions with $4.9 billion in total announced transaction dollar value. This meant that 2024 had fewer total transactions than any year in the last five. Total announced transaction dollar value was better than the reduced levels we saw in 2022 and 2023, but not nearly as strong as the levels that we saw in 2020 and 2021. We noted that there were a number of transactions in these past three months for companies that repair and refurbish telecom equipment. This included the acquisition of cell phone logistics company Likewize by Genstar Capital, as well as acquisitions of Basket Materials, Northern Technical Group, Relectro and Sunny Communications.
The two transactions this period with announced multiples were both small. The $3.7 million acquisition of Suardi by Planetel had a multiple of 1.0x revenue.In addition, the $2.5 million acquisition of Japanese telecom construction company Js Telecom Systems had a multiple of 0.4x revenue. Neither transaction had an announced EBITDA multiple.
Number of Transactions
$ Value of Transactions in Millions
Announced Transactions (10/1/24 – 12/31/24)
Announced Transactions with Revenue Multiples (1/1/24 – 12/31/24)
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Prior to joining FOCUS, Mr. Pierce was a Director in the Communications and Media group of Stifel Nicolaus, a nationally recognized middle market investment bank. In this capacity he led Stifel Nicolaus’ entry into the networking technology space while also working with clients in a variety of other telecommunications-related areas. Mr. Pierce was also a member of the Telecommunications group at Legg Mason. While at Legg Mason he gained significant experience working with telecommunications service providers, particularly those serving secondary and rural markets. Mr. Pierce has been a speaker for a variety of industry associations including the Rural Cellular Association (RCA), the National Telecommunications Cooperative Association (NTCA) and the Fiber to the Home (FTTH) Council, and he has also been recognized as a testifying expert in the wireless industry. Before becoming an investment banker, Mr. Pierce had a successful seven year career as an officer in the U.S. Army Military Intelligence Corps. In addition to working in a number of tactical level assignments in the U.S. and Europe, he is a graduate of the Army’s Airborne and RANGER training programs.
Mr. Pierce graduated from Brown University with a B.S. in Electrical Engineering and received his M.B.A. in Finance from the University of Pennsylvania’s Wharton School, where he graduated with distinction.
