Deal marks second large fiber acquisition for CS&L REIT
Fiber network operator Tower Cloud is set to be acquired by Communications Sales & Leasing for $230 million in cash and stock. CS&L is the real estate investment trust that was spun off from internet service provider Windstream last year. Earlier this year, CS&L bought PEG Bandwidth for $409 million.
Tower Cloud was formed in 2006, primarily to serve wireless operators by backhauling traffic from the cell site to the switch. The company’s fiber network currently consists of 90,000 fiber strand miles in service across the southeastern United States, with 181,000 fiber strand miles awarded for future deployment for the major wireless carriers. The assets complement those of PEG Bandwidth, which are concentrated in the northeastern and mid-Atlantic states, as well as the south central states and Illinois. CS&L said it expects to achieve annual run-rate cost synergies of $6 million within three years of closing by combining the operations of PEG Bandwidth and Tower Cloud.
“Tower Cloud significantly expands our backhaul network and greatly accelerates our entry into the high-growth small cell and dark fiber businesses,” said Kenny Gunderman, president and CEO of CS&L. “We continue to grow our wireless carrier relationships across all asset classes and are seeing an increasing number of opportunities arise as carriers densify their networks and look toward the deployment of ‘5G’ and related technologies.”
Small cell focus
CS&L said that Tower Cloud recently won contracts from national wireless carriers to provide small cell backhaul services, and that this acquisition will accelerate CS&L’s small cell and dark fiber businesses. Although backhauling macro site traffic has been Tower Cloud’s bread and butter in the past, its CEO Ron Mudry sees small cell backhaul as an integral part of the carrier infrastructure equation going forward.
“Macrocell site backhaul is not separate from the small cell backhaul,” Mudry wrote in a recent blog post. “They’re going to be integrated, and what happens in small cell is going to affect what happens in the macro side.”
CS&L is clearly working to position itself to capitalize on carrier demand for fiber backhaul. At the time of its spinoff from Windstream last year, the company said it was the first REIT primarily engaged in the acquisition and leasing of communication distribution systems. Now the company owns 3.9 million fiber strand miles, 85 wireless towers and other communications real estate throughout the U.S. and Mexico.
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