As the year ends, it’s time to look back at what went on around the sector. Going into 2014, it looked as if the pace of M&A among competitive network operators focused on US wholesale and enterprise opportunities would slow down after the torrid pace of the past few years. To an extent that turned out to be true, however there was still substantial activity and there were a few big deals that really shook things up.
Two deals stand out when it comes to national scope and the ability to shift the competitive marketplace. One was of course Level 3’s purchase of tw telecom, which closed just last month. That deal brought together two of the country’s largest non-ILEC/MSO derived footprints into one national fiber footprint with over 30,000 on-net buildings. But it wasn’t the only deal that assembled a metro fiber footprint with unprecedented national scope. Comcast’s planned purchase of TW Cable gets lots of attention on the consumer side, but also would build a $7B+ business services division with the kind of reach no cable operator has ever come close to having and a growth rate to die for.
Several other significant supra-regional deals also took place. Birch swooped in and bought Cbeyond, giving it a nearly national scope in the biggest of its now very lengthy list of acquisitions. Megapath had been thought to be the buyer there, but when it didn’t happen they sold their wholesale assets and business to Global Capacity, which leaped into a still evolving but definitely larger role as a network operator. Consolidated Communications moved northward into the upper Midwest with the purchase of Enventis up in Minnesota and neighboring states. And GTT acquired both MPLS depth and some interesting fixed wireless markets with the acquisition of UNSi.
There were a variety of more geographically focused acquisitions as well. Although most of Zayo’s interest this year was either in Europe or in colo/interconnection, just last week they announced the purchase of IdeaTek’s network assets in a significant move on Kansas. The tower specialist Crown Castle moved into dark fiber with a deal for 24/7 Mid-Atlantic. FirstLight Fiber expanded in metro New Hampshire with the purchase of G4. And Wave expanded onto the Olympic Peninsula with a deal for CPI. Windstream even took a stab at fixed wireless out in Chicago with the purchase of BOB. And Last Mile Solutions crept onto the stage with the purchase of some unique underutilized metro fiber in the Boston area.
Another trend we saw though was network operators bolting on cloud, managed and IT services capabilities. Integra made two such deals this year, buying ProTel and WCI. Meanwhile, MetTel bought Thrive from Staples, and Masergy tacked on Global DataGuard. CenturyLink added to its cloud just this week with the purchase of DataGardens. There’s probably a longer list here, I’ll expand on it as my memory improves.
Meanwhile, private equity managed to continue to find metro and regional network assets to invest in. Court Square moved in with Conterra, Ridgemont invested in Cross River Fiber, Tiger Infrastructure Partners took a majority stake in Hudson Fiber Network, and Novacap bought Oxford Networks. I’m sure there were others, but not all such deals get public attention.
The M&A wildcard in this year’s deck, though, is the move by Windstream to spin off a network REIT. It’s still not clear whether that will start a new trend, whether it will become a consolidator itself, or whether it’s just paperwork that will change the taxes and nothing more.
All in all, a pretty active year for a sector that has seen so much consolidation already. But there were a few things we didn’t see. Other than the Comcast/TW Cable deal, the cable MSOs didn’t follow up last year’s metro fiber appetite with any more purchases of independent fiber assets. That doesn’t mean they didn’t look though, they’re just fairly specific in their appetites. We also didn’t see that much activity from the middle of the market. Zayo made only one US fiber acquisition (though December is young yet), while others like Lightower, Fibertech, FiberLight, Lumos, UPN, Cogent, XO, and PEG Bandwidth clearly spent their effort on the organic side this year.
Did I miss anyone? Feel free to chime in below. We’ll look at the European and International networks another time, as well as the activity in cloud/colo/interconnection and wireless.
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