The news is alite with the possibility that Crown Castle might sell off its fiber and small cell business. Supposedly competing in the process are Zayo Group (backed by EQT and DigitalBridge) and TPG, and the price tag attached to the rumor is in the $10B neighborhood. A deal might not happen, but we know enough about this sort of thing now to be able to tell that there likely is fire under that smoke.
The idea that Crown Castle might sell off its fiber business is not new. The company’s owners fought a proxy battle with the founder and other investors earlier this year specifically about the topic. Neither side was against a sale, it was more a battle between ‘we will examine the options’ and ‘now dammit now’. The former won the vote, but the latter might win the day in the end.
Crown Castle’s fiber network was assembled via acquisition. In 2015 they bought Sunesys from Quanta. A year later they bought FTL Fibernet. And a year after that they bought Wilcon and followed that up with the purchase of Lightower. Their goal was to assemble deep metro fiber reach alongside their tower footprint, and thus enable a rapid attack on the growing small cell opportunity at the time.
However, since then the assets from those deals have been rather quiet relative to others in the industry. Crown Castle has found it difficult to translate its fiber ownership into the growth they anticipated. One can argue why, but I’d say the company’s tower DNA was just not ready to address the breadth of customer segments it takes to make a metro fiber business hum the way it needs to.
It’s quite likely that a sale will happen, IMHO, so the question becomes who? Zayo is definitely an obvious candidate. Their backers have deep pockets, and the company certainly has the platform upon which to integrate the assets and drive synergies. But of course it depends on the money guys, and at the moment the money guys are hard to read. How bad does TPG (or any alternative suitor) want to be in the fiber business? Less than they might have 5 years ago, but with AI driving investments in data center infrastructure it doesn’t take a genius to see some spilling over into fiber as well.
But are there other potential buyers? Let’s speculate further:
- Cox Communications/Segra – The cable company has assembled quite a bit of fiber into its Segra subsidiary, with depth in the Midwest, Mid-Atlantic, and Southeast. The acquisition of Crown Castle’s footprint would add California, Florida, the Northeast, and Texas and make them truly national. It’s a bit more wholesale than they might like and I don’t know if they want to spend that sort of money, but if they do…
- Uniti/Windstream – I doubt they are ready to make this move give that their own merger won’t complete for quite some time yet. But like with Cox, the fit of metro depth is, well, interesting.
- T-Mobile – We have seen them make moves in the FTTx space recently, could the UnCarrier make a play for this sort of asset? It would help them out with their tower connectivity costs, and I can certainly see synergies in there. But like Crown Castle, I’m not sure their DNA is ready to take on the fiber business all of a sudden and they probably know it.
- Other financial players – TPG, EQT, and DigitalBridge are big buyers but certainly not the only fish in the pond. I could certainly see Macquarie taking a look, and there are plenty of others with the resources.
- A breakup – Crown Castle’s fiber has some big chunks that seem relatively easy to break up and sell off. Lightower’s assets might be a real target for someone like Lightpath or even FirstLight. The California assets might look awfully attractive to Uniti/Windstream to complement what Windstream has been doing on the west coast in longhaul. In fact there could be a whole series of regional buyers backed by big private money that could appear in this scenario, and it’s possible Crown Castle might get a better price for its trouble.
I’m sure we will get some clarification before winter is over, and probably sooner. Any other possible buyers out there? Leave a comment and I’ll follow up with my thoughts.
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Categories: Mergers and Acquisitions · Metro fiber
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This is a great example of Wall Street not having a freaking clue how business works. There is very little upward growth opportunity for the Crown Castle tower business. Other than whatever Dish is going to do, there are no opportunities for large-scale revenue increases.
Fiber, however, has tons of opportunity.
Zayo would be the absolute worst candidate for the Crown Castle fiber. In many markets, Zayo and Crown Castle are the primary dark fiber players. You can’t have one gobble up the other.
Worse for the buyers of dark fiber perhaps, but better for Zayo? I don’t think regulators would actually stand in the way, whether they should or not.
Well sure, better for Zayo, but regulators should be more concerned about what’s better for the customers.