Lightower/Fibertech and Crown Castle/Quanta show insatiable hunger for dark fiber, but what deals are left?

Sean Buckley, FierceTelecom

It has been a busy week of consolidation in the dark fiber services space with two major deals taking place: Lightower Fiber Networks buying Fibertech for $1.9 billion on Monday and on Thursday Crown Castle snapped up Quanta Fiber Services (Sunesys) for $1 billion.

While Lightower was successful in bidding on Fibertech, speculation about it being an acquisition target dates all the way back to 2010. At that time, rumors emerged that Fibertech, along with KDL and Alpheus, were all heading for the auction block. Ultimately, Alpheus was purchased by Gores AC Holdings in December 2011, KDL was acquired by Windstream and Fibertech was bought by Court Squared.

Lightower has become a consolidator in the Northeast, purchasing Sidera Networks in 2013 for $2 billion. It has also bought a number of smaller providers such as Veroxity, Lexent and Open Access, giving it greater presence in New England and parts of New York.

In an interview with FierceTelecom, Lightower CEO Rob Shanahan said that the company always had been interested in Fibertech, and for good reason. Over the past four years, Fibertech has been expanding its network in the Northeast and Midwest, with fiber builds in Connecticut, Ohio and Detroit.

Through this deal, Lightower will gain 30,000 route miles of fiber, nearly 5,000 wireless towers, and almost 13,000 on-net service locations. Having fiber connected into more building and tower locations means it can provide Ethernet to more businesses and respond to wireless operators' needs for higher speed backhaul services.

"I think this was a good move for Lightower in that it gives them better density in the Northeast and starts to move them West into some new markets," said Cindy Whelan, principal analyst, business Network and Wholesale Services for Current Analysis, in an interview with FierceTelecom. "After this closes (assuming they get the approvals), Lightower would have around 31,000 route miles of fiber and would more than double their on-net building count."

Still, Lightower lacks the national footprint that Level 3 and Zayo currently enjoy.

"This makes them a much stronger challenger (and wholesale service alternative), particularly in the Northeast, although they will be operating in a more limited region relative to the national reach of Level 3 and Zayo," Whelan added.

No less important is Crown Castle and its purchase of Sunesys, a deal that could give it the ability to potentially serve more than 3,500 small cell opportunities and expand its fiber footprint to a total of 16,000 miles.

However, it appears Crown Castle is also conducting a wider wrap-up of dark fiber assets. Besides Sunesys and its previous purchase of 24/7 Atlantic, it is buying Access Fiber Group, which serves Birmingham, Nashville, Charlotte, Milwaukee, Louisville, and St. Louis.

But the bigger question is: What's next in dark fiber acquisitions?

With Level 3 and Zayo having snapped up the largest competitive wireline fiber players, including tw telecom and AboveNet, there's not a lot of acquisition targets left. Many of the remaining fiber assets remain in the hands of CLECs, the major ILECs and cable operators, all of which are unlikely going to sell their assets.

Shanahan said the company will purchase other regional players that add complementary elements to its existing footprint. "There are some smaller ones throughout our existing footprint that could be interesting at some point in various places that would be good to roll under our umbrella," he told FierceTelecom.

Whelan agreed with Shanahan's assessment.

"There are not be a lot of acquisition options left in the market, so I don't know that we'll see many (or any) really large acquisitions in the future," Whelan said. "But given Lightower's track record of acquisitions in recent years, I wouldn't be surprised to see them make some smaller acquisitions, possibly in the Midwest or maybe Southeastern U.S. if they can find the right opportunity."

Indeed, there are assets in the field worth buying. A number of regional players like Cross River Fiber, FirstLight Fiber, Fiberlight, SummitIG and Wilcon could be attractive dark fiber targets.

Another possible outcome could be that Level 3 or Zayo could even make a move on either Lightower or Crown Castle. Zayo hasn't been shy in making regional and large deals like AboveNet in recent years. It could use either company to bolster its dark fiber and wireless backhaul base. In Level 3's case, a bid for these companies in the near term would be unlikely given its focus on integrating tw telecom into its fold.

Regardless of what the outcome is, it's clear that the appetite for dark fiber is on the rise and independent competitive service providers are stockpiling more fiber assets to respond to a host of new wholesale and retail service opportunities.--Sean