If there are any two words in the telecom industry that connote money and dominance those words are Crown Castle. And now, they’re making moves to prepare for more of the same in the future. They have done so by switching their emphasis and buying fiber providers. First it was Sunesys, then Fibernet and Wilcon. Their latest acquisition was Lightower, who Crown Castle announced on July 18, 2017 that it had entered into a definitive agreement to acquire Lightower.
Why the change of emphasis for Crown Castle?
Crown Castle has long been the king of wireless towers, but understood that the traditional tower business has, to an extent, flat-lined. They also came to realize that the bandwidth and coverage demands of the crowds required a metamorphosis of the system that supported them. Their recent acquisitions have equipped them with fiber-based network density from Washington D.C. to Maine, Chicago, South Florida, Los Angeles, San Diego. And just like that, Crown Castle is effectively serving 50% of the population density in the United States.
These acquisitions have their own revenue streams that support the financial burdens of the purchase. However, that is not why they were acquired. There are over 1.2 handheld devices for every person in the United States. Over 15% of the population has abandoned wired connections completely. These stats, as well as dozens of other indications, reflect the wholesale move from a traditional telecommunications infrastructure to one that revolves around wireless.
Behind every wireless node there is a need for bandwidth, which explains the move to acquiring fiber companies. Wireless cannot support terabits in the same way as a fiber-optic infrastructure. The new generation of networks requires a seamless overlay of hundreds of thousands of micro-cell sites, meshed together and tied to the content that we all crave by fiber networks.
Spending 10 billion seems like a lot of dough to prepare for what would amount to only a portion of the revenue pie; however, when you look at the size of that pie, 10 billion dollars is a cup of water poured in the ocean, a mere fraction of the potential revenue associated with wireless. Of course, execution is the key.
Was it the right move?
The Crown Castle mission has been clear for a number of years now. They’re kings in the tower, small cell and DAS (Distributed Antenna Systems) business. And their acquisition of fiber based carriers is to support that primary mission.
As they acquire more large telecom companies, they become true regional, and perhaps soon national, providers of telecom services. Is that what they want to become? Another question they’ll need to consider is whether or not this will ultimately hurt their valuation. The tower industry trades at a much higher level than telecom, so there’s a potential concern that by becoming more and more entrenched in telecom, their valuation as a tower, small cell and DAS company could start to suffer.
We’re seeing the market consolidate quite a bit so there’s fewer providers that will sell dark fiber. That’s a concern in specific markets. Maybe telecom becomes their core business, but historically Crown Castle is not a telecom company. They do, however, want fiber, and they’ve acquired a lot of it, and a lot of customers along with it. If they decide moving forward that they don’t want to be in telecom, they may decide to spin off the telecom business while keeping the newly acquired fiber assets.
What does this mean for the Customer?
From a customer standpoint, there may be some concern because this level of growth is often where a company becomes harder to work with as a consumer. Here’s where you start to add in the “it’s difficult to deal with this company. Customers are likely to experience what they experience with AT&T, Verizon, and Level3 now being merged with CenturyLink.
Every company goes into M&A with right intention, to remove duplicity and add synergy. Lightower is still going to function as it is. Having been in the industry for a very long time, with any acquisition, there’s always talk about business as usual, but there’s always changes and it will be interesting to see what those changes are.
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