Over the last few years Crown Castle has been busy buying metro and regional fiber, with the biggest recent moves being Lightower, Wilcon, FPL Fibernet, and Sunesys. The question many in the sector have had is just what kind of fiber infrastructure player does the longtime tower operator have in mind for these assets? With us to start to answer that question is Jim Young, SVP and COO of Crown Castle Fiber.
TR: How is the integration of your many fiber acquisitions going so far?
JY: It is not complete yet, and we are deep into the integration process. We have achieved a lot and expect to be complete early next year. We have really focused in on what our go-to market strategy is going to be, and have identified some key investments associated with that market strategy and begun on a well-bounded path making those investments. We've identified leaders of the organization across all the major functions and departments. It is complex because we're knitting together seven great companies into a common set and a common presence in the marketplace all operating under the same cultural norms. These are outstanding, outstanding firms that have brought just tremendous additional waves of talent into the organization. We are all about growth at Crown Castle, and that growth is going to only be delivered if we take advantage of all the expertise and experience these people bring with them. But in the meantime, we're very much open for business and having a really spectacular year in the midst of moving forward with the integration.
TR: Many of the companies you acquired were serving the enterprise, how are you approaching that market given that it wasn’t something you had to worry about from the tower side of things?
JY: We are absolutely committed to the enterprise space where we have over 8,000 customers. This is where we're really working as hard as we can to leverage knowledge from these strong firms that we're putting together into one company. The expertise and the experience that we get from legacy Lightower, Wilcon, Fibernet, Sunesys, and others is really helping us plot our course. We're excited about its growth because demand for bandwidth is clearly not confined to wireless. Frankly, the more we have learned about it, the more convinced we have become it is an exceptional business to be in. It is another use for the fiber. We're really consistent in our approach to telecom infrastructure, in that you want to put all the creditworthy customers you can find onto your infrastructure, whether it's towers or fiber. We are really pleased by the extra dimension it gives us and the relatively new group of customers and markets that we can access. And that's what's really exciting. When we were primarily focused on wireless backhaul, it was a pretty short list of customers. It's a much longer list of customers in the enterprise space.
TR: How about the wholesale business, has entering the fiber business affected your relationships with network operators?
JY: I've been in some sort of telecom, both wireless and wireline enterprise, for almost 35 years. You have to get very comfortable very quickly with your relationship with wholesale providers since we both sell to each other and compete with each other. The word “coopertition”, I think, was coined sometime around the divestiture of AT&T back in 1984. The wholesale business is very important to us and it was a big part of the success of the firms that we've acquired as well. We want to continue to cultivate the relationships with our wholesale partners, and we're as committed to that space as we are the enterprise space.
TR: Where are you seeing the best growth from right now?
JY: Towers present really sustainable growth rates of course, and we're seeing fantastic growth rates in small cells. But we are actually seeing higher growth rates in our fiber segment than the tower segment. The tower business is growing at an incredibly large base, and the fiber business is growing from a smaller base, of course. But we're looking to fiber to be a significant growth engine for this company over the next decade and beyond. Those growth rates are a big motivator for us in becoming the fiber player that we have over the last couple of years. We are seeing tremendous demand from our wireless customers, not only for small cells but also for fiber, and the enterprise appetite for increasing broadband is not abating at all.
TR: How tightly integrated are the two sides of your business? Are the tower and fiber operations separately run?
JY: We're all one company; we're all on the same team. But for operational efficiencies and effectiveness, we have a fiber line of business. A lot of our customers, especially our wireless customers, need fiber at the towers that they're on, and we work together to make sure we provide a seamless experience to the customer. We never want our customers to feel like they're dealing with different divisions in the company, and we are really pleased with how that's come together.
TR: Much of the rationale for moving into the fiber business was for tower backhaul, how has the ability to bundle towers with fiber worked out in practice?
JY: It’s really been great. We have 22,000 towers with fiber already, out of 40,000 total, and that's a tremendous go-to-market product offering. It really allows us to expand our conversations with customers in a way that five or six years ago we weren't really in a position for. To be able to say, "Look, we have a tower in an area that you need, and we can also provide connectivity to that tower" is a tremendous value proposition with very positive synergy. It's generally very well received. And then obviously, the conversation then expands to the small cells we can put on the fiber and to new small cells we can build on existing fiber.
TR: Do you foresee further M&A to expand the fiber footprint further?
JY: We’ve probably set the benchmark in the marketplace for fiber M&A over the last couple of years. But we're really pleased with the value that we received. Crown Castle been very disciplined for a long time in terms of how we invest, being very responsible in terms of investing in assets that we feel will advance our business. We are certainly always in the marketplace, and we are always looking to align acquisitions with our strategy. I don't know that you're ever ‘done’ because the marketplace depends on what's presented, right? You can rest assured that we will be looking at every deal that does come to market. Some will fit our strategy, and we'll pursue them. And if the outcome comes to a point that makes good value sense for us, we'll move forward with that. Ultimately it’s up to the seller of course.
TR: Has fiber consolidation mostly run its course now, or is there still plenty of action ahead?
JY: An acquisition the size of Lightower is certainly not an everyday occurrence, but there's still quite a bit of fiber out there. It's sort of hard to predict when things will come to the market. There's fiber out there that's not for sale. In my experience, the M&A market often works in spurts and there are a lot of factors that influence how robust it is. We obviously just came through a period of very active investing, and we're working hard to integrate and put those investments together into a great product in the market. So I think we're open to the idea that maybe the market's a little bit calmer now. But we're just always going to be open to where that market leads us. There are always smaller acquisitions that might help us, and we'll look at those. It's all really about what fits with our footprint and our strategy.
TR: Do you have further organic expansions planned for your fiber network? What drives those decisions?
JY: We feel really great about the markets that we're in -- all top 23 of 25 markets in the US. We place a real premium on having dense metro fiber, and we're really excited about the position that we have in each of those markets. That being said, deals that come up that can increase the density of our fiber are incredibly attractive to us. So as we take on more small cell and large enterprise business, we will continue to do that through organic expansion. We're all in on investing in a disciplined way in projects that are going to produce a suitable return for us. We are really pleased by the opportunities that have come in the door organically and the market is incredibly robust. We want to be where our clients want us to be. The enterprise space and the wireless space are incredibly complimentary. As we take on a new small cell build in the market, often we're going to turn around before that fiber is even constructed and market that to enterprise customers. And that works both ways. As we take on large enterprise customers, that becomes more fiber that's immediately marketed to our wireless customers.
TR: What verticals are driving the most growth for you right now?
JY: The simple answer is wireless. But we've had a number of verticals that have been really successful this year, such as healthcare, entertainment & media, and financial services. Education is a huge vertical for us also. And they are quite complementary. As we build out certain education systems, we have found they have a high affinity for matching up with small cell requirements in many markets. The other verticals all have identification in urban and suburban settings. Our company obviously has been very heavily focused on wireless for the majority of its life. But as we bring the enterprise business into Crown Castle we expected lots of complimentary effects there and we have not been disappointed in the least. We've really seen that they're really helping push each other along and that has helped drive our growth rates to a really great direction.
TR: As you move deeper into the enterprise space, do you foresee the product set you bring to market evolving?
JY: I think any successful company in this space has to be open to the products that their customers need. For instance, one of the faster-moving points of demand we've had is combining the assets we have in California with the assets we have on the east coast. Being able to offer those to companies that have locations on both coasts has led to great demand. So we've been working to connect our markets nationally. We are leasing some capacity and building some wavelengths, focusing on Ethernet connectivity first. It’s really very customer-led based on what products they're requesting between certain markets.
TR: What’s going to make you successful at the end of the day?
JY: What’s really important to know about Crown Castle is that we are all in and committed to taking all these really outstanding companies that have become a part of Crown Castle and merging them together, not just on an assets basis but also a cultural and employee basis, into one truly synergistic company. We have brought in literally over 1,000 new employees in the last 18 months to become part of Crown Castle. Successfully integrating them into one Crown Castle company is the single best strategy that we can have. It is certainly not as technical as how to connect our markets or what technology to use. But we believe so strongly in building one culture in this company because we think that's the most effective way to interact with our customers. We're working really hard to make sure that our employees understand our strategy, that they understand the priority we place on customer service. And that starts with maximizing the employee experience. We really believe we're on the right path, and I can't emphasize how happy we are with the experience, the expertise, the professionalism, and the sensitivity to customers shown by the legacy and new employees that have joined us as a part of Crown Castle Fiber. I think having the best workforce in the industry combined with having the best assets in the industry is a home run. We're really just getting started, and we hope to build on that momentum as we roll very quickly here in 2019.
TR: Thank you for talking with Telecom Ramblings!