Already highly speculated by the industry, Crown Castle (NYSE: CCI) is entertaining offers from competing firms – fiber network operator Zayo Group and buyout firm TPG – to sell its fiber and small cell assets in a deal that could be valued at nearly $10 billion, Reuters reported. Zayo, headquartered in Boulder, CO, is a DigitalBridge Group (NYSE: DBRG) portfolio company and is jointly owned by Swedish investment firm EQT AB.
Zayo operates a 145,000-mile fiber transport network across North America and Europe that connects mobile network operators, cloud service providers, data centers, and large corporations. Note that the company is in neither the fiber access nor small cell business. Zayo and TPG, based in Fort Worth, TX, are said to be the two remaining bidders for Crown Castle’s fiber and small cell business, according to sources.
Both Crown Castle business units are estimated to be worth around $5 billion each, according to Inside Towers Intelligence. Crown Castle could sell just one of them, although selling both assets could be valued between $8 billion and $10 billion, sources said, noting that no deal is imminent, and a transaction is not guaranteed.
At the end of 2Q24, Houston, TX-based Crown Castle reported digital infrastructure assets of 40,036 towers, roughly 90,000 fiber route-miles and about 115,000 small cells in service or under contract, all in the U.S.
The company, which has a market cap of over $50 billion, has grown its fiber business through several acquisitions since 2015. However, the high cost of building and operating fiber infrastructure has retarded its financial performance, forcing the company to reconsider its strategic initiatives and cut costs.
To put it into perspective, the fiber and small cells business generated one-third of the company’s total $3.2 billion site leasing revenues through the first six months of 2024, but are expected to absorb over 85 percent of Crown Castle’s $1.3 billion budgeted capex in 2024.
Towers are still Crown Castle’s primary business. Jettisoning its fiber business would allow the company to focus on its tower business, mainly with the Big 3 MNOs that accounted for 74 percent of site leasing revenues in 2Q24. These MNOs will still need tower space as they continue expanding their 5G network coverage and capacity.
The company undertook a strategic review of its fiber-small cells business after reaching a deal with activist investor Elliott Investment Management, Inside Towers reported. In February, Crown Castle’s co-founder Ted Miller told Reuters in an interview that the company could fetch as much as $15 billion by selling its fiber assets if it let him and his partners join its board of directors. In June, the company cut its annual profit forecast for 2024, and said it would lay off 10 percent of its workforce as a result of the strategic review.
By John Celentano, Inside Towers Business Editor
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