Two announcements this week shook up the metro fiber markets in the USA this week: Lightower is taking out Fibertech for $1.9B, while Crown Castle is buying Sunesys for $1B. That's a significant amount of fiber changing hands, and it's worth taking a moment to step back and look at where we are.
Level 3 is busy integrating tw telecom, the biggest metro fiber digestion it has ever attempted. Nevertheless, they signaled in their earnings call that they aren't out of the game, although they would be looking mostly overseas so as not to rock the boat with the integration. Colt and its 20K+ on-net buildings remain the obvious target.
Zayo's most recent acquisition after last year's IPO was in the colo space with Latisys, and some (including me) were a bit surprised that they didn't outbid Lightower for Fibertech. But I think that's because Zayo is preparing to pounce elsewhere, and it could be one or both of two places: FiberLight in the southeast, or euNetworks over in Europe. Of course, it could be literally anybody else too given Zayo's voracious and omnivorous history.
Crown Castle, with 3 acquisitions in 8 months, has now emerged as a growing force in the sector. And it is one that I don't really have a sense of yet, however all their targets have had a dark fiber focus with an existing fiber-to-the-tower interest, so additional targets will likely fit the same profile. Actually, FiberLight looks good for them too, as does PEG Bandwidth perhaps.
XO Communications is still out there in Icahn's hands, but one gets the feeling that his game is winding down. XO still has that extensive metro footprint and other attractive assets, but with various levels of CLEC baggage that would come along with it. Many see their destiny as to be one day folded into Level 3, but I like my Comcast idea better.
Cogent is another national provider with an extensive on-net metro presence that could be a target at some point. They clearly aren't very interested in consolidating assets themselves, but the question is how long CEO Dave Schaeffer wants to run the business he built now that it's achieved most of what he started out trying to prove it could. I like the idea of a cable MSO buyer here also, simultaneously adding national metro reach and eliminating a thorn in their interconnection side.
With two dozen plus CLEC deals over the past seven years or so, Birch has been very busy. But only last year with the Cbeyond deal did they start to get into metro fiber. Yet since then, they've started to see some success with it, and it's possible they might want to acquire some more. It would probably be something like Earthlink's though, rather than a move into the lower dark fiber layers of the business.
Now, on to the US regional players:
Lightower's move to buy Fibertech made a lot of sense for them, but there's no reason to think they aren't still hungry for more fiber in adjacent regions. Lightower once could be called merely a northeastern fiber power, but their footprint now covers all of the mid-Atlantic, much of the rust belt, and is reaching into the south. The very obvious next target for them could be Lumos Networks, which would help them bulk up in Virginia and Pennsylvania, while adding West Virginia as well.
FiberLight has been going through another internal reorganization, as its private equity owners at Thermo Companies stepped in and put their own co-founder and managing partner in the CEO position. I don't think that's their long term plan, but rather an indication they are getting ready to sell it. FiberLight's western Texas expansion seems to have stretched their coffers more than intended.
PEG Bandwidth has been almost invisible of late, busy with organic projects. I think their profile will rise, but as a more likely as a consolidator than consolidatee. Their focus on more rural tower connectivity will probably mean their targets will be lesser known as well though.
In Texas, Alpheus Communications may or may not be looking for a deal, but as a regional independent fiber operator in a key market that has been owned by private equity for a few years now, I'd be amazed if they aren't fielding calls.
In the far northeast, FirstLight Fiber has done its share of consolidating over the past few years. Now they look like an interesting way for a national carrier to move deeper into the edge markets they cover.
Lumos Networks is another regional operator with a unique footprint that is getting more attention than it once did. It has been rumored to be for sale over the past few years, and (as previously mentioned) seems like a logical target for Lightower at some point. But Zayo or Crown Castle make some sense also.
Integra's western regional footprint has always seemed like a likely target for a variety of players, and that's become more true as they have put money into their metro depth in recent years. The revival of the Electric Lightwave brand suggests they don't plan to go anywhere soon though, and the list of likely buyers has thinned some lately.
Wave Broadband has been busy consolidating lesser known assets in the Pacific Northwest, and it's likely they will continue to do that.
Unite Private Networks has been quietly building a midwestern fiber empire from Iowa to Colorado's front range. They did a bit of consolidating of their own a while back with Zito Media's Nebraska footprint, but somehow have managed to stay out of the fray thus far.
There are a few smaller puzzle pieces in the southeast there whose plans I don't have a sense of. FPL Fibernet bought its way into Texas a few years ago, but have been rather quiet since then. Southern Light Fiber and Southern Telecom have also stayed aloof from consolidation, and Tower Cloud is somewhere out there too. But I think any of these four could find Crown Castle knocking on their door soon.
There are a variety of single market players out there like DQE in Pittsburgh, SRP Telecom in Phoenix, and Wilcon and Edison Carrier in Los Angeles that could find buyers if they wanted to, but don't seem to be in any hurry.
Then there are the Cable MSOs. Will Comcast's cable glass ceiling prompt them to look outside their footprint? Or will cable's metro fiber appetite remain tightly focused on geographies they are already in? Probably the latter as always, but if not then we would see a rapidly evolving landscape.
And last, but most difficult to figure out, is CS&L, the REIT spun off this week by Windstream. They aren't an operator so much as a financial vehicle for sale and leaseback, but what role they might play in enabling consolidation by Windstream or others is unclear.
Over in Europe, Interoute has promised to cast a wider net, euNetworks is looking opportunistic, and Colt is, well, being as inscrutable as always. The potential targets in Europe are more fragmented though, and the process takes longer. Zayo and Level 3 of course have interests on the continent as well. But the big guys are doing wireless and cable mega-deals, there is less attention being paid to the fiber side still.
Anything else I should ramble about? Leave a comment and I'll do my best.
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