Crown Castle CEO Ben Moreland likes to call fiber “the horizontal tower” and this week he announced plans to broaden the tower company’s fiber reach with the $1 billion purchase of Sunesys, a wholly owned subsidiary of power giant Quanta Services. Crown Castle said that the move will more than double its fiber footprint for small cell deployments. The company has often used the term “small cells” to describe outdoor distributed antenna systems as well as discrete small cells.
“Based on current small cell activity, including awarded and proposed small cell deployments, we have visibility into more than 3,500 small cell opportunities on or near the Sunesys fiber,” Moreland said today in a statement.
To date, the majority of Crown Castle’s small cell and DAS builds have been for Verizon Wireless. Verizon has said it will allocate $500 million to small cell deployments this year, and is currently working with Ericsson to deploy outdoor small cells and with SpiderCloud Wireless to deploy in-building small cells.
Crown Castle is getting access to more than 9,000 miles of fiber through the Sunesys purchase, and roughly 60% of those fiber miles are located in the top 10 basic trading areas. Basic trading areas are geographic areas designated for the allocation of 800 MHz spectrum licenses for U.S. mobile service providers. There are 493 basic trading areas in the U.S.
This week at PCIA’s Wireless Infrastructure Show, analysts noted that the deployment of small cells is motivating fiber players to act more like tower companies, and encouraging tower owners to become more involved with fiber assets. For Crown, that clearly means buying fiber when the geography and the price are aligned. This is the company’s second major fiber purchase. Last fall Crown Castle bought 24/7 Mid-Atlantic Network, giving it a fiber footprint that lined up well with deployments planned for Verizon in the Baltimore area.
Crown Castle has stated clearly that it does not intend to enter the fiber business for its own sake, but rather as a means to an end: deploying more wireless infrastructure and leasing it to mobile operators. The geographic concentrations of the Sunesys fiber offer insight into where some of those upcoming builds may be. Major metropolitan areas served by Sunesys fiber include Los Angeles, Philadelphia, Chicago, Atlanta, Silicon Valley, and northern New Jersey.
Quanta Services and Crown Castle are both Houston companies, and both have ties to telecom. Quanta owned a telecommunications infrastructure services business until 2012, when it sold that unit to Dycom for $275 million. At the time, some astute industry observers wondered whether Sunesys would be the next to go.
According to Quanta Services, Crown Castle is paying 15 times trailing EBITDA for Sunesys. Analyst Jennifer Fritzsche of Wells Fargo noted that this was a higher multiple than buyers have paid in other recent fiber deals.
“This is ahead of recent multiples we have seen in the 11x-14x range for other fiber deals,” Wells Fargo wrote in a research note. “We note however, CCI expects the deal to be immediately accretive to adjusted funds from operations (AFFO)/share.”
