Okay, good afternoon, everybody. Welcome to the Goldman Sachs Communacopia and Technology Conference. I'm Jim Schneider. I'm the telecom analyst here at Goldman Sachs. It's my pleasure to have DigitalBridge CEO Mark Ganzi with us today. Welcome, Mark.
Thanks, Jim. Good to be here.
Maybe as a lead-off question, can you help us understand sort of your investment approach in the infrastructure space and how you're different as an asset manager versus REIT in the space?
It's an interesting journey for us. You know, we started as a REIT in 2019, and what was becoming really apparent to us is the amount of CapEx that was required to support our customers. At that point in time, you go back in 2019, we were kinda halfway through the journey of building public cloud. At that point, probably, CapEx was somewhere in the order of magnitude of just about $0.5 trillion. Today, public cloud is about 80% built. About $1.3 trillion of CapEx has gone into that. And I think there's a broad acknowledgment, even by our peers, that our publicly traded REITs today, whether it's, you know, whether it's Andy or whether it's our friends at Equinix.
To build these campuses and to build this type of infrastructure is not measured in tens of millions, and today, not even hundreds of millions. We're talking about billions of dollars of CapEx, and so we felt like, at that point in time, that an asset-light approach would enable us to go quicker, would enable us to serve our customers better, and more importantly, it would enable our earnings to grow faster than in the format that we sat in, which was a diversified REIT. And so we made that pivot. It took us about four or five years to get there. We had to sell a lot of commercial real estate that we inherited. We had to clean up our balance sheet, get rid of about $17 billion of debt. Today, we have about $300 million of securitized debt.
What it does for investors is it really allows them to participate in digital infrastructure at scale, but not taking outsized risk, if that makes sense. Now we have a balance sheet that's levered at a very sensible level. We're not levered at, you know, 55%-60% loan to value. We're levered sometime somewhere between 3.5 and 4.5 times FRE, depending on which numbers you believe. We think that's the sensible approach, and also the ability to have different sleeves of capital is so important today because a lot of our customers want us to show up for them and manifest ourselves in different ways than we hadn't historically had thought of. We think about our flagship fund and the different companies we own there.
We think about InfraBridge, which owns infrastructure, digital, and transports, and energy. Credit is such a great hot product for us. It's really working well. We can provide capital to middle-market companies between 25 and 100 million of EBITDA. Our core strategy is coming back into favor as interest rates moderate, and people wanna own long-term assets, and we have a lot of stuff that we're working on in energy, and so it also gives us flexibility. We're not stuck, and I think this dovetails into what you and I were talking about earlier. A lot of our customers just don't buy data center space. They don't just buy fiber space. They don't buy space on our towers.
They're buying holistic solutions to their network, and that's really something that we deliver at DigitalBridge that, unfortunately, an American Tower, a Crown, or an Equinix or Digital Realty cannot do. It enables us to have more conversations, more connectivity with our customers, and allows us to just grow faster. Our model is working, and we are growing faster on a CAGR growth than our public peers that are REITs.
Yeah. In terms of differentiators, I heard you just raise to scale the diversification. What are some other advantages that you see for the asset manager approach, and specifically, maybe what do you think is misunderstood about the DigitalBridge investment case?
First, let's start with a couple of other things that perhaps I didn't say at first. One, I like the notion where investors ride side by side with my personal capital. It creates really good alignment. I think as an asset manager, where you've got the senior leaders in the company investing hundreds of millions of dollars into those products, you have spectacular alignment with our public shareholders, but you also have that alignment with our private LPs that invest in our funds. The second thing that's really interesting about the asset manager approach is, if we are successful across the forty-six companies we own and operate today around the globe, guess who really benefits? Public shareholders, because you get to play in our carried interest.
And so as we're successful and we achieve greater than a two times MOIC or above an 8% hurdle, on average, we're generally getting 15%-20% of the profits. And now, as you know, as part of our model, public shareholders grab a big piece of that chunk of that carried interest. So as our funds mature, DigitalBridge is now 11 years old. We're now beginning to divest, as you saw in the first and second quarter. We're creating DPI, we are exiting some assets, and that's creating capital, that's creating liquidity, but it's also starting to create carry. And not carry on an episodic basis, but carry on a consistent basis. And look, we're sitting on $86 billion of assets today across those 46 companies. We're managing $34 billion of equity at work.
Generally speaking, digital infrastructure is a great asset class because generally, you deliver kind of between two and three MOIC. So if you took the midpoint of that at two and a half MOIC, and you look at the $34 billion of capital that we manage for the top investors in the world, you can begin to extrapolate over the next, certainly over the next 3 to 11 years, there's a lot of carried interest that's gonna be paid out, and investors that have that patience and wanna invest in the long term with us are gonna be able to benefit and enjoy those profits side by side with our management team.
Yeah. Now, AI, that's been a consistent, maybe unrelenting theme at this conference, I would say. Today, a lot of companies are just in the early stages of trying to figure out what AI means for them very early on in their journeys. At the same time, we've seen hyperscale CapEx go higher year after year after year. We'll get them in different segments, but maybe from your vantage point, owning towers, data centers, fibers, et cetera, how do you see all this kind of playing out in terms of a holistic portfolio of different assets?
I think we manage a lot of third-party capital. We have close to 300 clients around the world, and the first question I get at every fundraising meeting today is, "All right, tell us what to do in AI." I think the narrative on AI is pretty similar to the narrative of the last 30 years of investing. There's always something that comes along every five to seven years, and everybody goes: "Wow, I got to go jump and do that." My experience is you never get too high on the highs, you never get too low on the lows, and generally speaking, you know, the AI trade is kind of an interesting place. Maybe it's a little ahead of itself, maybe we overcorrected, but the reality is, history has a way of repeating itself.
Having built digital PCs, having built the early stages of the internet, and having built a lot of companies that are part of these phenomena, it takes time, right? It took a lot of time for the internet to make money. It's taken a lot of time for public cloud to make money. It took a lot of time for mobility to make money. Remember the days in wireless when all the carriers lost money? AI is no different, and so I tell people, "Don't get euphoric around AI and the next great idea, because for every ten ideas in AI, eight are going to fail." That's just kind of the algorithm of investing in early stage venture investing.
But what is interesting is that if it does follow the same arc that the public cloud followed, it took the hyperscalers about six years to start to monetize cloud earnings, right? So they started building that infrastructure in 2011. Those businesses began to cash flow in 2016 and 2017. That was really the catalyst moment. So when we look at AI, we have to say to ourselves, "Look, we're two years into this." We're in maybe the bottom of the first, top of the second in a nine-inning baseball game. So don't get overly euphoric about it. Now, the challenge to that is to make all of this work requires infrastructure, and all of the verticals that I just talked about, fiber, mobility, cloud, we know those were multi-decade journeys in terms of building that infrastructure because we started in 1994. That's our heritage, is building networks.
So I guess we have perhaps a little bit more sober perspective on it. And on the CapEx side that you explained, you're right. I mean, CapEx back in 2023, hyperscale CapEx was around $186 billion. It got to about $196-$198 billion last year. It's going to $230 billion this year, and it's going to over $250 billion in 2026. So CapEx is rising, and these guys aren't monetizing AI yet. But my suspicion is, if you believe that AI infrastructure got started two years ago, the logic or the algorithm would point to 2028, 2029 being the crossover point where they begin to monetize. We actually have a late-stage venture growth business.
We invest in companies that use our infrastructure in stage Series C, Series D. We announced a joint venture with Intel called Articul8, which is a great business that focuses on generative AI and sort of private cloud environments, which has actually gone much better than we thought. And those... We're getting bookings far faster than we thought. So maybe AI goes a little quicker, and maybe I'm being perhaps a little bit too punitive. But what is interesting is, if you look at that CapEx that was spent last year, that almost $200 billion of CapEx, it wasn't just in data centers. Everyone thinks that AI CapEx is just related to big hyperscale data centers. It's not. It's ecosystem investing. So one of the great benefactors of that has been fiber.
There's been a tremendous resurgence in enterprise fiber for us, and that's been primarily in dark fiber routes, where we're seeking either new routes to data centers. AI requires multiple interconnection path, which is redundancy. Instead of two-path redundancy, four-path redundancy.
Yep.
We're going from hyperscalers purchasing four pairs of dark fiber to 12, 24, 48, so they not only want diversity in route selection, but they want more dark fiber, and so who wins? Well, for us, it's Beanfield, it's Everstream, it's Zayo. It's all of our businesses that are connecting data centers to those cloud environments or back to those pops, so we think fiber is one of the interesting, sort of tangential winners. We do think in time, mobility is a big winner. We do believe that most of generative AI applications will ultimately reside in a mobile product, so that ability for generative AI to work and gather information and gather data and ultimately make decisions doesn't happen at a desktop. It doesn't happen in an office building. Decision-making happens in the consumer's hand, or it happens on the device.
So that's a connected car, that's an IoT network, that's a machine-to-machine connection. We believe that generative AI will consume three X more data than public cloud did on mobile devices. So if you once again go back in public cloud, and you look at what happened to mobile data traffic between 2015 and kind of circa 2020, mobile data traffic went up ten X, Jim, in that five-year period, as cloud adoption moved to the device. The same thing will happen in generative AI. So we believe there'll be a three X increase over the amount of usage that you see on devices today. So we're very positive on towers, extremely positive on small cells, very positive on fiber. And the key thing to this is, you know, ecosystem benefits. And so when you get back to the DigitalBridge case, and why is it interesting?
It's interesting because we're building AI infrastructure holistically. I'm not just saying: "Okay, I got to turn on capacity in Johor, or I've got to build a fiber route from, you know, Manassas, Virginia, to Dublin, Ohio, because I got to connect two, two data centers or two clouds." It's, it's really about where we've evolved as a firm, is a holistic relationship with the customer. So when I sit with, I sit with Google, or I sit with Amazon, I sit with Microsoft, I sit with Deutsche Telekom, it's like, "How can we help evolve your network?" I'm not looking for a single order. I'm looking on how I can weaponize the 46 companies and the $84 billion of assets we manage to the benefit of our customers. That is very unique.
That is the most unique digital infrastructure platform on the planet, and so we, we've got to get out there and evangelize the story a little more, so the stock will perform. But, we're very excited about what we're doing, and, and our customer relationships have never been better.... because the things that we're doing and the ways that we can show up for customers is very unique, and that's, I think, really the story today.
Yeah. Now, there seems to be a lot of capital still in the sidelines that wants to invest in infrastructure, whether that's private equity, infrastructure funds, and otherwise. You know, do you believe at this point there are enough good assets, and projects out there to invest in that can drive good returns, or are people kind of stretching to find levels of returns that they find acceptable? And maybe talk about what your threshold is.
Look, for 30 years of investing, we wake up every day and we have a decision to make as allocators. We can go out and we can buy assets, and we can execute a brownfield strategy and create great platforms, or we can go up and do greenfield. Look, in the last 24 months, greenfield has been fantastic for us.
Mm-hmm.
I think we mentioned on the last quarterly call, we've got over a hundred data centers in development, $29 billion of CapEx committed, all of that tethered to a long-term contract, 13, 15, 17 years in duration. I've never seen single-tenant yields on data centers where they are today, and some of that is a supply and trade imbalance, and some of that's about power. We can talk about power in a second, but, I'm actually finding that... and we saw this on display last week.
We had a decision to make on a big data center asset in Asia, where we could have matched another GP, and we could have paid a 2.3% cap rate to go chase that asset, or we can go into that market, and we can go back up behind our best customers and go build single-tenant locations at 11%-12% yield. What's a better use of capital? Is it chasing something to an IRR that's, for us, doesn't work, where we get uncomfortable and we over-lever the asset, which we weren't willing to do? Or do we go with one of our management teams and really focus on our customers and focus on six critical markets in Asia, where we can go toe-to-toe and compete? We chose the latter. It's better for us.
It's in our DNA to work with our customers and to... and compete with other platforms. So I think there are situations that we look at, if you look at the last four deals we've done on an M&A side, we actually feel like we've been chasing value. I do think for investors today, as we look ahead to close to $80 billion of LBO debt maturing in digital infrastructure in the next 36 months, we do think there's going to be value. So we don't want to chase assets to a 2 cap or a 2.3 cap.
I'd rather work with our customers and get a 15-year lease and build an asset that I know and control, and that ultimately I can lever and securitize and take that 11-12% cash yield and turn it into a mid-twenties IRR, which we can do quite well. But it doesn't say that we're turned off for brownfield. I mean, we did a recap of Vantage with Silver Lake that's gone really well. We bought a small, really interesting business that lights up fiber to multi-dwelling units in the Southeast called OpticalTel. Really happy with that acquisition. We just announced the first big tower deal in Japan, J-Tower. Very excited about that, to have a platform that'll focus on tower development.
We are doing M&A, but at the same time, if I had to sort of frame, you know, where we're deploying our CapEx today, I would say 50% brownfield and 50% greenfield. I think you just have to be really disciplined right now. This is a moment in time where discipline will really matter.
Yeah, makes a lot of sense. Maybe just kind of switching data center for a second. You know, the bulk of what we've seen in data centers has been training. It's been about training, training, training, and now, people have talked about inference a little bit more. How do you think about kind of the trade-off between investing in wholesale data centers versus retail data centers? How do you think the transition between training and inference goes? How long does it take to kind of get there, and how do you think about balancing your investments?
It's interesting because I think a lot of investors don't understand that the data center marketplace is actually six different business models. And so we wake up every day, and we say, "There's six different ways we can deploy capital into data centers." Certainly, managed services, hybrid cloud, you mentioned it, retail colo, you have hyper edge, you know, tier two, tier three, near edge compute. You've got public cloud, and you've got private cloud. Now, where are those big AI workloads being built? They're being built principally in training models. Most of that is in private cloud. A lot of people think that AI just sits out in the public cloud, but that's not true. All the hyperscalers are building those initial language models in a private environment. Why? We're not turning it loose yet. That's inference, right?
That's when you get to generative AI. And those big, big sort of language-based models, which are kind of four hundred to one gigawatt workloads, those data centers are not exactly readily available. And so you have to be very careful about how you do those and how you build them, and we've built a few of them, and they're very hard, and they require a lot of CapEx. But if I think about the six sort of different business models and where we can put capital, we're sort of risk off on managed services. We do have a little bit of hybrid cloud that we do. We're very negative on retail colo. We think that's an aging and dead asset. We love hyper edge, which is what DataBank does, which Equinix does.
Edge computing, for us, that's our fastest-growing vertical. It's actually faster than private cloud and public cloud. We're obviously very long on public cloud. We've got Vantage, we've got Scala. We're very excited about what we're doing there. Then, probably our most intriguing business is our private cloud business at Switch, which has just absolutely defied gravity in the last two years. I think as investors, you get to choose, right? You can wake up and decide where you want to allocate capital, and ultimately, the returns are very different across those six. Not all data centers are created equally, and so, you know, if you're looking at sort of managed services, those businesses trade at four times. If you're looking at retail colo, it'll trade at, you know, 11-12 times.
If you're looking at hyperscale data centers, it's going to trade in the mid-twenties, or as we saw last week, a two cap rate. So it's a little bit of pick your opportunity and choose wisely and really understand your risk tolerances and understand how that correlates to returns. But I think for us right now, we're super focused on edge. We're very focused on private cloud and public cloud, and those are the three areas where we're investing. The other three areas, we're kinda risk-off.
Yeah. Yeah, fair enough. I guess maybe, just trying to think about, you know, how you think about kind of on the other side of things, you know, potentially monetizing assets over time, in your portfolio. There's obviously been some rumors out there last several days, but how do you think about kind of like, you know, those things, if anything you wanna comment on, on that front?
I always tell everyone in our Monday morning meeting that everything's for sale, always. The junior partners in the firm look at me, and they go like this, and they're sort of like, "Why, why did you say that?" It's really simple. We're investors, right? I think we do compete against asset managers. I wanna be clear, there's a difference between being an asset manager and an active investor. We're the latter, we're not the former. My job is not to collect fees for 12 or 13 years and not monetize assets. There are other people that are GPs and that are in the infrastructure space and that trade as asset managers, and they want to collect management fees for a long term. We think our job's a little bit different.
We think we have a very high standard that's placed on us every day. We have over 300 LPs. We have a fiduciary responsibility to create great returns for them, which we've been doing for many decades. The duality of being a public GP and being an investor is part of the game or part of our job is we do have to return capital. So we've had 8 exits in the last 24 months. We've returned over $8 billion of DPI, and, you know, in the first quarter this year, we had some DPI. The second quarter, we had DPI. Look, if we're gonna keep fundraising to the cadence that we're raising, part of that mission, part of that job, is I have to return capital back to my LPs to get new capital.
There will be episodic quarters where we have a great outcome, and we exit something at a great price. We lose the management fees, but we gain carried interest, and I think that's a big part of our story, is that we're sitting on a significant amount of carried interest that I don't think people appreciate or the street appreciates. I think what you were talking about earlier is there was a story about Switch. I've been in all my one-on-one meetings today, I think the first question I get is, "Tell us about the Switch IPO." Everyone's ready for another publicly traded data center play. I won't comment on Switch's IPO or not IPO. What I would say is, great assets and great management teams can find their way back into the public market.
It's been a lot of fun working with Rob and Thomas and Madonna Park. They've done an amazing job. And it's such a unique asset because no one does private cloud like Switch does, and nobody can do it at scale. And I think the thing that we saw in Switch that maybe public investors missed was a massive land bank where we could build out 12 million sq ft of data center space, and we had a runway clearly into 4 gigawatts of power, and not just regular power, renewable power. So that combination of renewable power and a massive land bank is what we recognized when we diligenced the company, and now we've executed. We've gone out and more than doubled the EBITDA of the business in two years. Way greater than that, and it has a huge pipeline, and it's executing.
We also gave a great, talented CEO, Rob, who ... wasn't exactly in love with dealing with public investors, 'cause Rob's a very mercurial talent. What we've done is we liberated Rob, and we freed him up to go do what he does best, which is sell to customers and build great data centers. When we can work with CEOs, and we can help them catalyze their dream and help them go in the right direction, we also gave Rob billions of dollars of capital, which as a public company, Switch was stuck. It didn't have billions of dollars of capital to make 400-600 megawatt commitments to big customers. He then had a big wallet. He didn't have to go to public investor meetings.
We freed him up, and he just absolutely crushed it, as did Thomas, and as did Madonna. So it's one of those unique stories where you can take a company private, make it better, and perhaps we do bring it back into the public format, 'cause Rob, I think, is a little older. He understands a few more things, and also the business is really cash flowing now, which is great. So it may... It could be Switch 2.0, but I wanna come back to where we started this conversation, which is: What is our job? You know, when do we sell assets? We sell assets when we can get a 30%-40% premium to NAV, which is held on our books. It's almost our responsibility to sell an asset.
So if anyone comes to me and gives me a 30%-40% premium to NAV, we'll sell. We did that with Wildstone, our digital billboard business in Europe. We sold it to Antin, and we loved that business, and we loved the CEO, and the business was growing at 25% CAGR. It was the only consolidated owner of digital media infrastructure in Europe. Antin saw that. They bought the business. They paid us a massive premium for the business. And recently, I was in Paris meeting with Alain and his partners at Antin, and they said, "Wow, we're so happy. That business has absolutely crushed it for us." That makes me happy because we actually sold the business to them. We achieved our outcome for our LPs. Yes, we lost some fees, but we gained DPI.
We printed a great return, but most importantly, we printed carried interest for our public investors. And, it's not like that that's super unique. We're gonna go back out and do it again, with a different management team. But I like outcomes where everybody wins, and to have a seller come to have a buyer come back to me two years later and say they're really happy with an asset and they're happy with the management team, means we've also done something nice because we've actually sold somebody a business that's high quality, and we're not afraid to do that. We don't need to hold the asset for 10-15 years.
Great. I've got about 25 more questions on data centers, but maybe I'll forestall that for a second.
Okay.
And maybe ask about fiber, another important part of your business.
Sure
... which you referred to before. You know, Lumen has announced about a $5 billion deal with with Microsoft and other partners to kind of interconnect data centers. That's... You referenced that as an application area.... Maybe when it comes to these kind of deals or contracts with this, just kind of general characteristics, what type of returns are you underwriting? Can you see more deals like this in the future, or maybe many more deals in the future? And you know, this is a dark fiber deal, how interested are you in participating in that kind of deal in particular?
We do that.
Yeah.
We do that at Everstream, we do it at Beanfield, we do it at Zayo. So we're very skilled at building dark fiber networks. I think, look, for Lumen, it was a necessary transaction. The structure of it, I didn't love. I wouldn't sell my network, which is kind of what they did. I think the original Level 3 transport network is one of the best networks out there, so selling a piece of that maybe was the right idea for Kate and what she needs to do with that business, but it's something we wouldn't do. We wouldn't sell the infrastructure. Instead, we would sit with the customer, and we'd say: Tell us the diverse routes you need. We'll tell you where we have network. If we don't have network, we'll go build it for you.
But I think when you're in the infrastructure business, you know, the last thing you wanna do is sell the asset, so we have a great relationship with all the hyperscalers. We're building some fantastic routes, and I think what's interesting today, versus where the fiber business was three, four years ago, is we started at all of our fiber businesses with a mantra about two and a half years ago, that the only way the fiber business is going to work is if our customers start putting up NRC, non-recurring charges, and so getting our customers to invest in new routes and giving us that CapEx upfront, it's really important to us 'cause it defrays our going in CapEx, 'cause our CapEx at Everstream and Zayo was just too high. It wasn't sustainable.
So my first goal, my first priority, was reduce that CapEx going in, create shared infrastructure, and create shared risk. We have to share in that risk with the hyperscalers, and we're building dark fiber routes. And then the key to that for them is they have money. They can put up CapEx. And what we tell them is, "Look, we wanna reduce your MRC, so your monthly recurring charges are lower." And by reducing their charges, they have less hit to EBITDA, and everything for them is about earnings and revenue growth. So this actually was a good way to reset the relationship with a lot of our hyperscale customers. And I think what we see is we see a more efficient use of capital.
Our return on investment capital, which used to be a null set, is now inside of 48 months at Zayo, and Everstream, and Beanfield. We've gotten all of that CapEx recapture now inside of four years. Sometimes you've got to have that discipline again to step back and reset the relationship. The good news is, there's a lot for everyone. I'm happy for Lumen. I'm happy for Kate. I hope they succeed. I want everyone to succeed. I think... Ultimately, when you're doing these big greenfield projects, they're complicated in fiber, particularly if you're doing a long route, a long-haul route that's greater than 500 miles. We're finding that those long-haul routes are really lucrative. The mid-mile routes are doing really well for us.
So a lot of that metro loop, where you're cutting laterals off those metros and out to data centers, or out to towers, or out to RAN hubs, that's proving again, that's coming back again. That business is coming back as 5G densifies. And more importantly, as the mobile carriers create C-RAN and O-RAN, where you have those cloud on-ramps, those are proving to be really good areas to invest in fiber. So fiber's really come back. I'm talking on the enterprise side, I won't talk about residential. But and deal-making's coming back. I think you saw in the last two to three weeks, we've had a lot of deals, and Frontier and Verizon, I think, was a great trade. I think both, both organizations won. The MetroNet trade was, was fantastic.
I mean, for our friends at Oak Hill, that's a great outcome. I mean, I'm really happy for them, and hopefully, that works out for T-Mobile as well. So there's a lot happening in fiber. I think you're going to see more fiber assets trade. And it is one of the tangential winners coming out of AI, early innings.
Yeah. How do you think the fiber market evolves? Because it seems... Well, I don't know if it's clear to... if I'm even right, but it seems to me like there's not every customer in the world that's a hyperscaler, who can handle dark fiber and managing that kind of asset. So, you know, as this kind of percolates down to enterprise and down the stack beyond this kind of very small set of customers, how do you think the market changes?
People still need lit services. You, you hit the nail on the head. Not everybody wants dark fiber. So from that perspective, we still see growth in lit. Pricing pressure is really tight. You have to have good relationships, you have to have unique routes, and you've got to be able to leverage scale in that business, in lit services. Lit services is a big boys game. So we still do it. It's profitable for us. It's net of churn, it's still profitable, and we're growing. But it's, you know, in terms of the dark solution or data center connectivity solutions, that dwarfs that growth in terms of lit services.
But I think as a fiber player, whether you're Beanfield in Canada, you're Everstream in the Midwest, or you're Zayo with a nationwide footprint, you've got to have that full suite of services. And there's other products you have to have. I mean, you know, I think about SD-WAN. SD-WAN is a really important product. You have to have the ability for some organizations to create a software layer to their connectivity. Most organizations are doing that now, so our SD-WAN product is growing. We bought a business called QOS in Zayo that's performed well. And also, you've got to be cognizant of what's going on with NTIA and some of the broadband grants. We've won some of those important opportunities. Won one in Louisiana, we won one in Nevada. We're bidding on a lot more stuff.
The NTIA is finally releasing that $35 billion out there into the wild.
Mm.
It took some time to get there, but-
Yeah
I think what you'll see in the next 24 months is a lot more of that Build Back Better America grants, part of the broadband bill initiative. So there should be more E-rate opportunities. That's been very lucrative business for us, where we light up schools, and we get 10-year contracts that are sort of government-backed. There's a lot going on in fiber, but it's definitely starting to turn, and we'll see. It's been a battle coming back out of COVID, but I think we're fighting our way back.
Yeah, and then on the tower business, I wanna ask you how that one plays out, 'cause clearly, I think we're about 50% or a little more upgraded in terms of 5G on the domestic tower portfolios for most of the carriers. You know, given the sort of uncertainty out there about when more spectrum becomes available.
Right
... you know, how do you think this kind of plays out in, in their investment plans? Do you think that we see, you know, build-out of that and then a lot more densification, or how do you think that, kind of goes?
We invest in towers globally. We're in five different continents around the world. We're building infrastructure in Asia, we're building infrastructure in Europe, North America, Latin America, and each of these regions, Jim, is growing at different speeds and velocities. I think if I had to stack rank, you know, our favorite markets today, we think the U.S. is in a great place right now. We're investing heavily with three of our big customers. We've got built-to-suit relationships in place with all three of them, and we actually see that more macros are coming on because there's actually a lack of spectrum.
Yeah.
That lack of spectrum creates frequency reuse, which is a lot what we saw in congested 3G networks, congested in 4G networks, and now that 5G is turned on, we're seeing the same thing. So history, again, has a way of repeating itself. We think there's probably 65,000-80,000 new macro towers that are needed in the next 3-5 years.
New towers?
New towers. And then on top of that, we think there's another three to four hundred thousand small cells that are needed from an outdoor perspective. The small cell market, the small cell outdoor market today is somewhere around eight hundred thousand nodes, give or take. So that's going from eight hundred thousand to a million one to a million two. This lack of spectrum, particularly in the mid-band and the higher bands, is a real complication for 5G. Maybe less so for T-Mo, given their rich spectrum position, but if you look at what Verizon and AT&T have, what we're seeing from them is a commitment to investing in the network. And we'll be there for them because Boingo can do it, Extenet can do it, Vertical Bridge can do it. We've got great companies that face those customers, and we're having really fantastic conversations.
Don't sleep on Latin America. We have two businesses down there. We have three businesses, Mexico Tower Partners, ATP, and Highline, all of them growing at double-digit CAGR growth. So that's mostly amendment traffic, some macros, some BTS, but we have ATP growing at 20+% . We've got MTP growing at 12% , and Highline in Brazil growing at 16% . So those are all three businesses growing at double-digit organic growth rates. We really like Latin America from a towers perspective. And then Asia has been quite good. Southeast Asia, we have the largest private tower company there called EdgePoint. Now we're over 56,000 towers, going to 80,000 , big built to suit pipeline. Finally, co-location is happening there. It took a while for co-location to get going, and soon we'll be in Japan, of course.
9 tower companies around the world, all performing. We've got a great relationship with Deutsche Telekom in Germany. That business has produced better than we thought. A lot of co-location now as the DT towers open up a little bit, and we're getting Vodafone, we're getting Telefonica, we're getting 1&1 . Belgian Tower Partners, we have the largest tower company in Belgium. That's performing quite well. We have a business in the UK called Freshwave, and another business called Digita in the Nordics, that owns mobile infrastructure up there. We're very steeped in towers. Towers is our sort of lineage. We've been doing towers for 30 years, and I still to this day tell investors, "I haven't found a better business model than towers." If you can find a better one, share with me.
I know data centers are super hot right now, but think about an industry that's been as resilient as towers has been for thirty years, and I think it'll continue to be resilient for the next twenty years.
Yeah. And just maybe to close on that point, do you think there's parts of your portfolio or parts of the infrastructure space that are kind of being overlooked or maybe, like, not prioritized for investors that that people should be paying attention to, and over what timeframe?
It's a value question, right? It gets back to what's your entry cost and how you get in. I mean, we've been looking at the satellite infrastructure space. We talked about digital media infrastructure, which is digital billboards. Suboceanic cabling is coming up for a significant day of reckoning. All of that infrastructure that was put in twenty years ago is aging. So glass, particularly glass under water, suffers from dissipation over time. And so a lot of these really, really important routes that were laid twenty, twenty-five years ago, they're aging out. So there's a huge opportunity to recycle capital in suboceanic cables. Nobody talks about that. That's a big opportunity.
It's a threat at the same time, and when you think about people cutting cables up in the Nordic Sea, we won't talk about who those people are, but the business is a good business. It's misunderstood. Satellite infrastructure, misunderstood. Digital media assets, misunderstood. So there's parts of the ecosystem that a lot of people don't pay attention, because right now it's super easy to be a front runner and go do data centers. But there's a whole ecosystem of trillions of dollars of CapEx that we focus on and that we're investing in every day. Again, it's about being completely focused on ecosystem, having capital to go anywhere, and most importantly, showing up for customers.
Yeah. Sadly, we're out of time, but it was an awesome overview. Thank you, Mark, for being here.
Thanks, Jim. Appreciate it.
Very good. Thank you.