After years of consolidation in the US fiber networking market, next week's likely closing of the Level 3/tw telecom acquisition will usher in a new era. It's been a year where the field of significant potential fiber M&A targets in the has passed the threshold from numerous to definitely scarce.
The only really national competitive fiber footprints out there that the likes of Level 3, Zayo, CenturyLink, and Windstream won't have acquired yet are XO and Sprint's wireline business. Both of those have been the targets of speculation throughout this whole cycle, and I think both will finally be resolved somehow over the next year or two. Probably. Ok, maybe.
And at the regional and supra-regional levels, the number of independent players at the dark fiber level among whom the final phase of the consolidation dance continues has dropped to about a baker's dozen. After Lightower, Integra, Fibertech, FiberLight, Lumos Networks, FirstLight Fiber, Alpheus, Southern Light, FPL Fibernet, EarthLink, US Signal, UPN, PEG, and Sunesys you start talking about single markets and increasingly narrow regional geographies focused on Tier 3/4 markets.
A couple of those, like US Signal, Southern Light, and Sunesys, have pretty much sat out the whole consolidation process and will probably continue doing so. Any of the rest could easily pair off as the party tapers off, with Lightower probably being the most likely of the group to do the buying.
On the other hand, one could argue that we still have about the same number of active larger buyers. Those that themselves were acquired in recent years have been replaced by the rising fiber appetite of the cable MSOs. But the attention of those potential larger buyers has become increasingly less focused on new US fiber acquisitions of late.
Level 3 will be busy for a year or more integrating tw telecom, while the newly public Zayo is clearly salivating over further European opportunities. Comcast, TW Cable, and Charter will remain busy with their own M&A triangle for some time. AT&T and Verizon still show no interest in wireline relative to wireless, while CenturyLink remains conservative when it comes to fiber. Windstream's fiber REIT spinoff plans leave them as a bit of a wildcard, but their potential appetite is not a sure thing either.
So other than private equity trading with itself, the field of likely US fiber M&A in the near future seems to have narrowed substantially. There's certainly still room for some important and interesting deals, but a few more is all. This winter we may be entering a phase in which the excitement shifts decidedly toward the organic side. That's a good thing too, of course.
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