It’s time to wrap up last week’s polls with a look at who Telecom Ramblings’ readers think is going to be buying US network assets this year. Or at least which network operators are likely to be buying. We know the biggest buyers currently have infrastructure funds involved somehow, whether directly or indirectly. But this is more about which existing platforms out there will get bigger, as it’s much harder to keep track of potential new financial entrants. That being said, what network operators topped the list this year?
Crown Castle was the clear leader this year, even after a year in which they made no moves. Perhaps now they have finished digesting the many assets they have picked up around the US and might start filling the gaps in their coverage. I agree there’s some potential there, they certainly have the resources. But do they have an appetite again?
Perennial M&A specialist Zayo is the second favorite this year. After being purchased themselves by EQT and Digital Colony while retrenching operationally in 2020, I do think that Zayo will get back in the saddle this year and buy something. That being said, I’m thinking it may be in Europe or Canada rather than the US.
Third is CenturyLink, which would certainly be interesting. Since the Level 3 transaction, the combined company has seemed far less interested in consolidation than in figuring out their own approach to the market. I don’t expect they would be willing to outbid the financial guys in the US marketplace, but in Europe I could make a better case.
Fourth is the regional operator FirstLight Fiber, which has to be running out of targets in the northeast by now. I have speculated that the financial guys might find a way to combine FirstLight with adjacent operators like Segra/Lumos or Everstream though, and would actually put them higher on this list. They’ll definitely be looking.
Fifth is, interestingly, Comcast. I’m not sure what the thought is here, whether it would be cable network assets, or something more on the fiber side, or something more content-related? They aren’t on my radar, but I’d certainly be interested to see them make a move.
The next two, Segra and Everstream, I put in a similar category to FirstLight Fiber. They have room to grow geographically and are backed by infrastructure funds that certainly might want to expand their investments.
Then we have Google, Amazon, and Facebook, each of whom seem to prefer a more organic route that doesn’t bring any legacy infrastructure baggage along with it. But on the other hand, the list does get seem to get thinner as we get lower so why not.
There are a couple down there that get less press, but which I would put higher on the list though. Hargray seems like they are just getting started in the southeast, ExteNet might be ready for some more infrastructure too, and it seems as if the Wave/RCN/Grande story might have another chapter yet.
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I didn’t think about Centurylink when I made my picks for the M&A 2020 draft, but thinking about your comment, I could see them being a buyer for the Interoute fiber from GTT. They spent years trying to figure out a way to buy Colt and that never happened. They have a large network in Europe, but they don’t own much of the actual fiber and are forced to rely heavily on the EU carriers, it’s still more or less what was the “blue” network. Only hiccup might be the ~35B in LT Debt their are carrying.
The issue for Centurylink and has always been the case with the Level 3 European assets is that they have hardly any metro network and very few connected buildings compared to say a Colt which is a big issue when providing VPN’s which is the lions share of their enterprise business. It is also the reason why growth slowed and is now declining since 2014 due to very low capital investment relative to its peers. Short termism and cost cutting leads to good cash generation near term but will ultimately lead to revenue decline and then more cost cutting and lack of capital investment in order to preserve cash. It’s a vicious circle that the board and senior team never quite got.
At what point, if ever, does network integrity, fiber security begin to become part of the conversation in addition to bandwidth?
When clients start buying based on them.
It is sad but true. They can pay all lip service they want to SLA on legal paper and performance with no actual architecture to support either. but they want it for dollar store prices.
What are the chances after the Zayo deal closes that EQT would merge Zayo and Segra into one entity?
I’d say that depends a lot on what Digital Colony would have to say on the subject. The combination is reasonable enough from the point of view of the assets of course.