Last week, Zayo's Dan Caruso gave the keynote talk at the Cowen Communications Infrastructure Summit which I was fortunate to be able to attend out in Boulder, Colorado. One of his main themes was that the company's earlier fiber-to-the-tower rollouts have given the company the reach to win a whole lot more enterprise and tower deals than it ever could have otherwise.
This morning, Zayo put a few numbers out backing up that idea. The company says that over the last 18 months, the company has sold such follow-on services at or nearby some 800 of its on-net towers and small cells. Those deals have led to $23M in incremental capex and an estimated rate of return of greater than 20%. Such sales were up 50% in the first half of 2015 over 2014. Nothing quite stretches a metro fiber buildout like fiber-to-the-tower, and Zayo's strategy of finding a wireless anchor tenant to justify the initial buildout across dozens of markets has doe just that.
Zayo's voracious M&A appetite since 2007 has often overshadowed the company's organic expansions. But the whole idea behind most of those acquisitions was always that Zayo intended to do more with those assets organically than the previous owners. As the fiber M&A landscape continues to settle down over the next few years, we're going to be spending more time looking at the organic side.
Even if Zayo continues on a similar M&A pace whether in fiber or colo, the targets that fit their profile are increasingly smaller relative to the whole than they once were. The same is probably true for other consolidators in the US service provider world like Lightower, Birch, and GTT. In the end, all consolidators must prove their mettle organically.
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