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Summary

On November 2, 2016, Crown Castle agreed to purchase FiberNet, the telecoms arm of NextEra Energy, for $1.5bn. This reflects both the market's requirement for consolidation and the commitment of Crown Castle to expanding its role from towers and backhaul to small cells.

Acquisition reinforces 2016 wholesale trends

The announcement could easily be overlooked as attention in the US wholesale market focuses on CenturyLink's recent agreement to acquire Level 3. Indeed, in one sense it is simply more of the same. To be successful in many elements of the wholesale market increasingly requires national scale and reach. Without the requisite scale, providers are suboptimum and struggle to compete in a commoditized wholesale service arena. This is especially true for companies such as NextEra Energy for whom telecoms is not a core business. On this basis, we set our expectations for more M&A activity at the beginning of the year.

However, the acquisition of a fiber provider by a company that has made its name in passive infrastructure is part of a trend that we expect to be repeated in the US and farther afield as small-cell demands increase. In our 2015 report RAN Evolution and Wholesale Services, we highlighted that wholesalers looking to maximize the small-cell opportunity need to provide more than just backhaul. Site acquisition is essential, and acquiring sites appears to be more challenging for wholesalers of fiber than it is for site owners to buy ailing fiber providers. Indeed, this is the second such acquisition by Crown Castle, which acquired Sunesys in 2015.

While those used to wholesaling backhaul links vacillate between revising pricing policies and finding small site locations, Crown Castle has been building thousands of small-cell nodes on its existing 16,000 miles of fiber. The addition of a further 11,000 miles of fiber will enable it to continue its buildout across new locations in Florida, Texas, and other south-central regions of the US.

Appendix

Further reading

"Acquisition of Level 3 by CenturyLink creates North American wholesale giant," TE0012-000586, (November 2016)

2016 Trends to Watch: Wholesale Telecoms, TE0012-000567 (January 2016)

RAN Evolution and Wholesale Services, TE0012-000555 (September 2015)

Author

Catherine Haslam, Senior Analyst, Telecoms Wholesale

catherine.haslam@ovum.com

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