Zayo revealed its latest wireless backhaul buildout project yesterday. They'll be expanding their network in and around the southeastern metropolis of Atlanta after winning a 20 year contract from an unnamed major wireless operator.
Atlanta is already one of Zayo's biggest markets, and they have 1,320 miles of fiber criscrossing the metro area already as well as regional fiber across the state of Georgia. The new expansion will add yet another 1,000 route miles to that network, bringing more than 500 towers on-net. In the snapshot to the left, the light blue is Zayo's existing dark fiber while the purple represents their planned expansions. Clearly much of the expansion will be to and within the outer suburbs, more than doubling the total area covered.
The net capex required will be a not-small sum of about $92.5M, which is expected to generate an initial unlevered cash flow yield of about 4% per year for the life of the one anchor contract. As always, however, Zayo will be using the new network reach to reach new customers, both in the form of additional wireless tenants and in the form of enterprises and institutions in the new areas their network will reach into. The company has perfected this plan of battle, and has been replicating it in market after market over the past five years.
This burst of organic activity follows a series of international inorganic moves in November. An expected bid for the pan-European infrastructure of Viatel finally happened, followed by a rather less anticipated announcement of plans to purchase Allstream and instantly become a major infrastructure player in Canada. In the US, Zayo's fiber footprint is pretty comprehensive nationally now, and the stories this year have been about buying colo assets alongside organic buildouts in both the metro and longhaul.
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