PART II. Rural Telecom Guide for Private Equity: AI-based EBITDA recovery opportunities in US Telco

Rural Telecom Guide for Private Equity: AI-based EBITDA opportunities in US Telco and their current limitations

ShadowHornet is a premier advisory and transformation partner to telecommunications-focused private equity firms, with a specialty in the U.S. rural telecommunications market. We continue to advise top 3 (MBB), investment advisory, and mid market firms on technology, operations, competitive landscape and market dynamics of the U.S. tier 2 and 3, and rural ILEC/CLEC topics. With a proven track record in enterprise-wide technology modernization, systems integration, operational restructuring, and due diligence risk management, we empower our clients to adapt faster, scale smarter, and lead in a digital-first financial ecosystem. Our expertise spans core systems assessments, AI-based workflow consolidation, cloud platform integration and diligence, and customer experience transformation.

This guide was designed to help private equity firms better understand how AI technology is impacting the U.S. rural telecommunications market to provide them better context about current cost drivers, EBITDA recapture opportunities, and the impact of AI as both a source of investment alpha, and as an evaluative consideration for investors interested in the U.S. rural telecommunications market – both software providers and fiberoptic broadband accelerators.  

About the Author

Thomas Mirc, Managing Director

ShadowHornet Strategic Advisors

Thomas Mirc is the former Managing Director and Chief Technology Officer of VertiGIS U.S., Battery Ventures’ geospatial platform company. VertiGIS U.S. (formerly Mapcom Systems) GIS solutions serve 12% of the US Tier 3 telco market, and one fourth of the U.S. rural market with presence in 48 states. Mirc served as an advisor to the White House Rural Council, and as a technology leader at Red Hat for nearly a decade, where his work focused on machine learning in predictive support for global financial and telecommunications firms.   

Part II. Key Questions and Considerations for Private Equity Companies

As AI advances, so do inflationary cost pressures in the industry, I see six key questions facing private equity firms looking either to bolster their holding returns via U.S. rural telecom investment, or to geographically diversify their holding returns by adding U.S. exposure. 

1. How does the current organizational approach of rural telecom firms limit their ability to effectively recapture EBITDA in the short, intermediate, and long-term?

   
   

2. How does the current technology approach of rural telecom firms limit their ability to effectively recapture EBITDA in the short, intermediate, and long term? 

   
   

3. What does the private equity firm’s desired capex / opex profile in out years (n + 1, n + 2, n + 3) enable and prohibit? For example, if limited capex is desired, or a capex walkdown over three years, what opportunities are available, and what kind of opportunities are likely blocked?

   
   

4. How can infrastructure providers leverage technology to drive EBITDA improvements in a construction/operations/asset heavy business?

   
   

5. Companies in growth phase are notoriously weaker on cost control and asset management than those at a later stage of maturity. How can these growth companies leverage AI to better control costs? 

   
   

6. How can AI reduce technology spend and diminish the need for software-related capex?

These questions summarize what I see as private equity considerations involving AI and rural telecommunications providers. In the next section of this paper, I address these core considerations and posit some solutions to the current profitability challenges inherent to U.S. rural telecommunications.