Chris Larocca, CEO of telecom design and engineering firm Network Connex, told Fierce the labor and materials markets have been tighter than he’s ever seen them before over the past 24 months. But more than labor or even equipment availability, Larocca said he’s worried about the financial climate in the U.S. and more specifically, whether it could hinder operators’ ability to get the capital or debt they need to deploy fiber.
Owned by ORIX Capital Partners, Network Connex provides fiber deployment services for residential networks, data centers and cell towers coast to coast in the U.S., serving everyone from hyperscalers to the big three mobile carriers and wireline MSOs. Its subsidiary, National Technologies (NTI), specializes in splicing and testing.
Annual revenue for the company falls in the $300 million to $400 million range. Larocca said revenue has been growing at a clip of 30% to 40% per year but note those figures would’ve been higher had it not been for labor constraints.
According to Larocca, the labor market was so strained that for a period of time competitors would roll up to job sites and offer crews 50 cents more per hour to change companies. Things have been better over the past 90 days or so with less voluntary churn among its 1,000 employees, he said, but Network Connex still has 250 open positions for everything from engineering to field work.
Thus, when the opportunity arose recently to get its hands on 80 skilled workers as well as deployment equipment through a deal with Track Utilities, Larocca jumped at the chance. Beyond labor and materials, the acquisition expanded Network Connex’s footprint in the Pacific Northwest, which Larocca noted is a hotspot for data center and residential fiber deployments.
Larocca said Network Connex already has deals in place with “multiple customers” in its new territory. While he declined to name names, it’s worth nothing that Amazon is plotting the addition of several new data centers in Oregon while Ziply Fiber is expanding its residential network across all three states – Oregon, Washington and Idaho – where Network Connex just acquired assets.
Still, Larocca said labor remains a “real problem” and one that is likely to be exacerbated by the billions in federal broadband funding coming down the pipe. But it’s not the only one facing that particular hurdle and the level of demand means Network Connex both has its pick of projects and some pricing power to pass along rising fuel, materials and labor costs.
What Larocca is more worried is how economic conditions might impact its customers’ ability to get financing – via either debt or capital – for continued expansions.
“The ability to get capital or get debt, it’s just not available right now or if it is, it’s terribly expensive,” he said. “So, when the capex market slows down, that would be a concern for me,” he said.
“We’re not seeing it right now, but it could be a delayed impact,” he concluded. “I hope I’m wrong.”