While last week's M&A polls will remain open for some days more, the trends are pretty clear. Telecom Ramblings readers seem more sure than usual about the direction of M&A ahead of us in 2017, and for the most I think the picks are quite sensible.
Heading up the list of likely buyers is of course the perennial runaway winner Zayo. I can't say I disagree, after averaging 4-5 deals a year since 2008 it'd be pretty stupid to bet against them and I certainly won't either. Three of the next four are also very sensible picks of active buyers. CS&L/Uniti Fiber made several moves in 2016, and is virtually certain to make more this year. Crown Castle is perhaps less visible most of the time, but also made a couple moves last year and seems likely to remain active. And of course GTT just finished buying Hibernia and has a longstanding appetite for rolling up further assets. Comcast, on the other hand, is seen as a buyer far more often than it actually is. It always feels like they should be making more deals for network assets than they do, but eventually the big one will land. Now that Level 3 is perhaps off the table it is probably Zayo that would be the focus of speculation. The top 5 (and eight of the top 10) have something in common that I don't think we've seen in these polls before. They're all publicly traded companies, which is quite interesting.
I'm a bit puzzled by Fatbeam's high position on the list at #6, although it's certainly reasonable they find a target to help with their expansion in the Pacific Northwest and northern Rockies. Maybe someone knows something I don't know. Lightower, on the other hand, is one I personally put even a bit higher on the list. Rounding out the top 10 were Windstream, which seems like a possible buyer to me also even as they integrate EarthLink, CenturyLink/Level 3 which I suspect will be rather preoccupied with their own deal and integration, and Google which never seems to actually buy network assets but is always a favorite dream buyer despite that. It's interesting who didn't crack the top 10 though. No cable operators other than Comcast, reflecting perhaps the integration work that Charter and Altice must do. Serial acquirer Birch isn't there either, reflecting a belief that maybe their firepower is ebbing. And no foreign-based buyers seem to be on the radar at all.
The list of most likely to be acquired is best seen in two pieces. Toward the top there are a selection of the remaining tightly-focused regional fiber operators with deep assets that seem like tasty morsels for further asset rollups by larger operators, and then there are national players that seem like tasty morsels for industry giants. Lightower leads the list, and it certainly makes sense that Lightower's own private-equity-backed rollup of northeastern assets will eventually end in a sale. But personally I still think it's likely that they make another deal or two first so it's fitting that they are on both lists. Accompanying them are four other independent regional fiber operators with deep assets on the top 10 list -- FiberLight, Lumos Networks, Wilcon, and Southern Light -- which fit a similar mold. I find the first three much more likely than the fourth, which seems more tightly held at this point.
The other half of the top 10 represents likely targets of the big guys. Zayo's position on the potential targets list is the highest it's been, and I think it's due to the CenturyLink/Level 3 deal. There's now only one big national metro infrastructure specialist out there for someone like Comcast to buy, and some think it's only a matter of time. I sort of doubt it this year, but I understand the thought behind it. Cogent Communications, however, definitely seems it ought to be ready to dance. Google Fiber is an interesting pick, but given Google's step back from the expansion of the business I understand that too. Coming up with a buyer I believe is a bit harder though -- AT&T? Consolidated? Private Equity? Windstream as a target is less clear to me, but it might be an interesting addition to the CenturyLink/Level 3 mix I guess. And there is Sprint Wireline, which should have been sold years ago. I think it's too late now except as part of a larger wireless deal.