In an extensive comment he left here recently, Zayo's Dan Caruso said that "the end of consolidation of fiber-based platforms is near". Certainly we have seen a lot of it in the past five years and the field is much smaller now. However, it got me thinking about pockets of the industry where there is a lot left to resolve. And the biggest, most obvious pocket of independent small and mid-sized metro and regional fiber operators is in the Northeast, i.e. New England, New York, and New Jersey.
You have three reasonably large footprints that are owned by private equity: Fibertech, Lightower, and Sidera. Each is very easy to see as a future prize for the likes of national operators like Zayo, tw telecom, Level 3, Windstream, or CenturyLink. Yet each is actively investing in its network and expanding its revenue base, and could just as easily be a buyer as a seller.
In New York City and New Jersey while there has been substantial consolidation there remain several other fiber footprints that could easily be involved in M&A. Cablevision's Optimum Lightpath division is unlikely to be sold, perhaps, but could easily choose to expand its reach organically. And the NYC and Long Island footprint of OCG still looks like an easily digestable morsel for any number of operators.
Then you have lesser known assets like ION and Tech Valley in New York, Sovernet in Vermont, and the Maine Fiber Company. The regional CLEC Broadview has some fiber as well, and is obviously in play as it is currently in Chapter 11. XO's Icahn is known to have sniffed around there and also has substantial assets in the region, and XO has of course been at or near the top of the potential consolidatee list for years.
It seems likely that over the next year we may see a substantial amount of fiber change hands in the Northeast, because while the financial end is variable there are just too many possibilities that work from a strategic point of view. Despite the region's economic importance, none of Level 3, tw telecom, Windstream, CenturyLink, or Zayo have New England and Upstate NY coverage that matches the rest of their territories, and only two or three really have what they want in the NYC metro area itself. They would be negligent if they weren't actively watching for such an opportunity, and the only one of them that is probably too busy with integrations now is Zayo, not that it is likely to slow them down.
Meanwhile, the private equity guys could easily decide to join forces after going head to head for a few years. Fibertech, Lightower, and Sidera have all been rather quiet on the M&A front for some time, despite having owners with deep pockets. While such investors can be in it for the long term, in general they tend to get, shall we say, restless after a few years of mere organic growth.
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