The Consolidation Endgame for US Fiber Networks

October 31st, 2014 by · 7 Comments

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 Those that themselves were acquired in recent years have been replaced by the rising fiber appetite of the cable MSOs.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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Categories: Fiber Networks · Mergers and Acquisitions

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7 Comments So Far


  • Level 3 closes TW Telecom deal says:

    BROOMFIELD, Colo., Oct. 31, 2014 /PRNewswire/ — Level 3 Communications, Inc. (NYSE: LVLT) announced it completed its acquisition of tw telecom. The transaction further positions the company as a global leader in the rapidly evolving business communications market.

    Level 3 Communications’ global headquarters in Broomfield, Colorado
    The combined company provides enterprise, government and carrier customers around the world with one of the most comprehensive product portfolios in the industry, supported by its global network and deep metro footprint across North America.

    “Level 3 is helping customers migrate to the next wave of technology,” said Jeff Storey, president and CEO of Level 3. “We know our customers’ needs are changing, and by bringing together these two great, customer-focused companies, we are taking the next step in the evolution of Level 3 and bringing us closer to realizing our vision of being the trusted connection to the networked world.

    “The combination of tw telecom’s rich metro footprint with Level 3’s global network, positions the company to provide local-to-global business solutions and deliver a world-class customer experience,” Storey continued.

    • Anonymous says:

      The next wave of technology, that Jeff Storey is referring to, is more than likey going to be pCell technology, that uses Wave radio antenna devices. Google and Level 3 have partnered to put similar antenna devices in all Starbucks locations. Also, Google is currently testing a millimeter wireless system, that could very well be Artemis pCell technology network. Google fiber will then be a thing of the past, replaced by pCell wireless networks, to the home or wherever.

      • Anonymous says:

        Oh, and by the way, for anyone who doesn’t know what the pCell wireless network is, here is a link. http://www.artemis.com/

      • Anonymous says:

        Nice plug, but I doubt thats what Storey was referring to, at least exclusively or even in particular. Its a platitude statement from an exec to the public is all. selling more bandwidth as cheap as possible is not exactly revolutionary.

      • End0 says:

        Regardless of whether pCell is or isn’t used (it’s, from my research in the space, both too expensive, and highly unlikely to be distributed en mass), there is still ample need for fiber, particularly metro fiber. Businesses, govt and private entities, consumers, etc. will all still need WIRED connectivity, for a long, long time…

  • mhammett says:

    There have been hundreds of small networks pop up. While not likely to draw the attention of those you mention, they may coagulate in the coming years. Of course as more small networks rise.

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