NOVA sees opportunities for high-speed internet in underserved parts of NYC

'As we learned during the Covid shutdowns, high speed internet has become something that really is essential for education or for business,' Beall said.

The quest to provide high-speed broadband internet in dense parts of New York City where construction costs for fiber internet are high offers an opportunity for NOVA Infrastructure, Chris Beall, founder and managing partner of the infrastructure-focused PE firm, told PE Hub.

NOVA announced on Wednesday that it had acquired Xchange Telecom, a provider of high-speed internet, voice and unified communication services to residents and businesses in the NYC boroughs of Brooklyn, Queens, Manhattan and the Bronx, as well as upstate New York and New Jersey. Xchange and its commercial business, Skywire, provide broadband to more than 2,000 lit buildings, 50 neighborhood hubs and relays, and a near-net footprint exceeding 350,000 buildings, the company said.

Both Xchange and NOVA are based in New York.

Beall said high-speed internet has become key for homes and businesses. This became apparent during the pandemic when many people were forced to work remotely for fear of spreading the virus. In schools, e-learning was integrated to help students continue their studies during the lockdowns.

“As we learned during the Covid shutdowns, high-speed internet has become something that really is essential for education or for business,” he said.

Even as covid cases drop from their pandemic peak, Beall expects the demand for high-speed internet to continue in NYC. The target market is in boroughs such as Brooklyn, Queens and the Bronx. “Those markets are very underserved from an internet connectivity standpoint,” he said.

Although NYC has a variety of service providers, Beall was confident that Xchange would beat the competition because of its distinctive advantages based upon its existing clientele and technology.

The high operating cost of building up fiber infrastructure in dense areas like Brooklyn, Queens and the Bronx is another advantage for Xchange against its competitors, Beall said. “If you stand on a rooftop in Brooklyn and spin in a 360 degrees circle, you will see concrete in every direction and building fiber into those buildings can be very expensive,” he said.

Instead of fiber in such areas, Xchange uses wireless and over-the-airwaves technology.

Founded in 2017, Nova is a middle market PE investor. It invests in infrastructure, mostly in the US and Canada, covering the telecommunications, environmental services, transportation and energy and energy transition sectors. The Xchange investment is from its $565 million Infrastructure Fund I that was closed in July this year.

NOVA first invested in Xchange in September 2021.

In identifying Xchange for investment, Beall said the high-speed broadband internet provider proved to be a “solid company that had good assets and good people” but needed access to capital in order to grow. This, he said, fits neatly into its thesis. “We look for assets that have upside potential that can be realized with an addition of more capital.”

Although there are prospects of penetrating other markets, Beall said, “We think there is plenty of opportunities in the New York markets.”