Report: Verizon in discussions to acquire WideOpenWest’s Chicago fiber network

Business executives shaking hands

Verizon is talking with WideOpenWest about purchasing the cable MSO’s Chicago fiber network as a way to augment its facilities for wireless backhaul.

WOW!’s fiber assets, according to a Reuters report citing people close to the talks, could fetch over $200 million.

Given the recent flurry of fiber deals taking place from a host of incumbent, regional and even tower providers like Crown Castle to satisfy current 4G and upcoming 5G small cell deployments such a deal from Verizon would not be all that surprising.

Crown Castle, which has spent much of its life as a tower real estate investment trust (REIT), recently signed a deal to purchase Lightower Fiber Networks for $7.1 billion. While the Lightower purchase is about fulfilling Crown Castle’s ability to address small cell backhaul, the acquisition doubles its fiber network to serve a host of other market segments, including education, government and health care.

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However, Reuters reported that no agreement has been made between WideOpenWest and Verizon and talks could end without a deal being consummated. The sources said that another buyer could also make a bid on the fiber assets.

WideOpenWest, which went public in May, is working with a financial adviser to explore a sale of the Chicago fiber assets, sources said.

Neither WideOpenWest nor Verizon would comment to Reuters.

Well-established network

Chicago has been a key market target for WideOpenWest’s fiber assets.

In April 2016, WideOpenWest completed the initial phase of installing and lighting a high count fiber cable connecting five of 38 planned downtown Chicago buildings.

Before it acquired the fiber conduit last year, WideOpenWest announced it was adding about 1,500 miles of fiber to provide backhaul for more than 500 cell towers in the Chicago metropolitan area. It also began offering a suite of Ethernet, Session Initiation Protocol (SIP) trunking, hosted VoIP and high-speed Internet services to local businesses.

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According to the sources cited by Reuters, Verizon is the wireless backhaul customer WideOpenWest serves.

While it is under a long-term contract with the wireless carrier, WideOpenWest had said it expected it would find more business customers to use the fiber.

Indeed, since the network is connected into multiple area buildings, WideOpenWest has positioned to be a viable competitor against incumbent telco AT&T. Outside of Chicago, WideOpenWest has been expanding its fiber base various Midwest and Southeast markets.

Steven Cochran, CEO of WideOpenWest, told FierceCable that “there’s lots of opportunities in the commercial space, lots of opportunities to expand.”

Verizon considers multiple fiber options

For its part, Verizon maintains that it will look at a number of sources for fiber to bolster its fiber network to satisfy its growing wireless backhaul and business services segment needs.

Evidence of this was seen earlier this year when Verizon completed its acquisition of XO Communications. By purchasing XO, Verizon gained metro fiber networks in 40 major U.S. markets with over 4,000 on-net buildings and 1.2 million fiber miles.

XO’s intercity network also spans 20,000 route miles connecting 85 cities.

The XO acquisition ties in well with Verizon’s “one fiber” strategy, which calls for Verizon to deploy fiber to meet a host of needs, including consumer wireline, wireless and business services.

At the same time, the service provider is ramping up its own internal fiber builds. In April, Verizon signed a $1.1 billion, three-year fiber and hardware purchase agreement with Corning. The telco will purchase up to 20 million km (12.4 million miles) of optical fiber each year from 2018 through 2020.

Additionally, Verizon struck a $300 million agreement with Prysmian as a secondary fiber supplier. Prysmian will supply Verizon with over 17 million kilometers (10.6 million miles) of ribbon and loose tube cables.

Matt Ellis, CFO of Verizon told investors during its second-quarter earnings call that given the diverse needs it has for fiber it will look at various options.

“As we think about the fiber we need for the business, certainly we need more going forward, as we've discussed in the past,” Ellis said during the earnings call, according to a Seeking Alpha transcript. “The way that we're going to add that capacity will be probably through a combination of buying fiber that already exists if it's the right type of fiber. We can build fiber, and we can certainly lease.”

Ellis added that whatever the method it takes, “fiber will continue to be very important the higher we build the network, not just for wireless but also various wireline applications, including Smart City deployments.”