Fiber M&A: 2018 Year in Review
Private Equity Funds Flow to Fiber
Fiber assets were a hot commodity in 2018, as both strategic and financial buyers were active in M&A. Sellers benefited from an active buyer pool that delivered healthy deal multiples for fiber properties. Strategic buyers sought to edge-out geographically into adjacent markets and densify fiber footprints in existing markets. Financial buyers were willing to pay high multiples to establish a fiber network presence in the U.S., gaining exposure to the rapid growth in mobile data usage and corresponding rising demand wireless backhaul.
A year after firms such as EQT made significant investments in regional fiber networks (Lumos Networks, Spirit Communications), private equity’s appetite for fiber assets remained strong in 2018. Australian-based investment manager AMP Capital purchased Michigan-based Everstream, the entity which purchased Great Lake Comnet’s assets out of bankruptcy in 2016. In another Midwest fiber deal, Canadian PE firm Novacap, former majority owner of Maine-based Oxford Networks, acquired Ohio-based Horizon Telecom. Elsewhere, Global PE firm Antin Infrastructure Partners acquired northeast-based FirstLight.
On the heels of two fiber acquisitions in 2017, private equity-backed Conterra Networks (Court Square Capital Partners) acquired regional fiber provider Network USA, deepening its fiber presence in East Texas and Louisiana and granting entry into new states—Arkansas and Louisiana.
Real-estate investment trust Uniti was an active fiber buyer in 2018, part of a concerted effort to diversify its revenue streams away from cash-strapped Windstream. The REIT acquired long-haul dark fiber routes from CenturyLink and purchased fiber assets in Arkansas, Louisiana, and Mississippi from CableSouth.
A pair of larger ILECs divested non-core fiber assets during 2018 to strategic regional operators. CenturyLink sold its metro fiber assets in Albuquerque, Boise and Tempe in three separate transactions to Unite Private Networks, telco consortium-owned Syringa Networks and FirstDigital Telecom, respectively. The sale of the metro assets was mandated by the DOJ pursuant to CenturyLink’s 2017 acquisition of Level3. Windstream sold certain dark fiber assets in Minnesota and Nebraska to Minnesota-based Arvig in an effort to monetize non-core fiber holdings.
Wrap Up & Outlook
Fiber M&A in 2018 continued the primary trends observed in 2017: regional consolidation of metro and transport networks marked by injections of private equity capital into the sector. Strong catalysts remain, laying the ground work for a busy fiber M&A scene in 2019: significant demand for fiber-based services and motivated buyers with plenty of dry powder.
Fiber networks—especially in metro areas—will be critical to supporting wireless providers’ efforts to densify their networks and rollout 5G services. Mobile data is expected to grow at a CAGR of 40.2 percent through 2023 which will drive increased utilization of fiber for wireless backhaul. Lofty growth forecasts such as this have attracted financial buyers to the fiber scene, and over the past two years PE firms such as AMP, Antin and EQT have established platforms for future regional consolidation with beachhead acquisitions. With ample cash in hand raised for specifically for investment funds targeting telecom infrastructure, it would be a surprise if these firms stayed away from the deal table for too long.