Following Lumos’ sale, analyst fingers T-Mobile’s possible interest in Zayo

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Buying Zayo "could provide T-Mobile with a strategic fiber backbone" for future wireless buildouts, a BTIG analyst said.

Now that Lumos has removed itself from the M&A playground, at least for the immediate future, all eyes are turning toward Zayo Group as the next possible acquisition target in the fiber market. And according to BTIG analyst Walter Piecyk, T-Mobile might be one of several companies that could make a play for Zayo.

“We believe T-Mobile’s controlling owner, Deutsche Telekom, would rather buy more assets in the United States than sell to SoftBank, despite the persistent press speculation of SoftBank’s one way interest, which appears to still somehow surprise some investors,” Piecyk wrote in a note to investors (sub. req.) shortly after EQT Infrastructure announced it would purchase fiber provider Lumos in a deal worth close to $1 billion. “An acquisition of Zayo could provide T-Mobile with a strategic fiber backbone for the new wireless architecture. Zayo could also expand T-Mobile’s presence with Enterprise customers, a customer segment T-Mobile can now better address after increasing its wireless coverage through the deployment of low-band spectrum.”

(According to recent reports, Japan’s SoftBank is willing to give T-Mobile control of Sprint if necessary to achieve a merger between the two smallest major U.S. wireless operators.)

Indeed, wireless carriers have already expressed interest in the ownership of fiber through acquisitions; Verizon recently closed its acquisition of fiber and spectrum owner XO Communications.

However, Piecyk noted that T-Mobile is one of a number of possible suitors for Zayo. Other companies that could show interest in the fiber provider include cellular tower company Crown Castle, which has already purchased fiber providers Sunesys and FiberNet in its efforts to own the fiber connections to small cells. And cable companies like Comcast and Charter Communications could also make moves: “Zayo also offers an enterprise sales force and global asset base that could enable Comcast or Charter to sell to a broader range of Enterprise customers,” Piecyk noted.

For its part, Zayo has already show its interest in significant transactions: The company late last year acquired Electric Lightwave, previously known as Integra Telecom, for $1.42 billion. And Zayo CFO Ken desGarennes said last month that there are a number of regional fiber players that could be attractive opportunities Zayo could pursue.

Piecyk’s comments on Zayo follow EQT Infrastructure’s announcement yesterday of its deal to purchase Lumos, the latest transaction in the red-hot fiber M&A market. Other recent transactions include CenturyLink’s purchase of Level 3 and Windstream and EarthLink’s agreement to merge.