In Short:
Zayo Group and TPG are vying to buy Crown Castle’s fiber and wireless assets, potentially worth up to $10 billion. The deal, which may involve the sale of either or both assets, is in early discussions and not finalized. Crown Castle, looking to focus on its tower business due to high infrastructure costs, is also under pressure from investors after cutting profits and laying off staff.
By Milana Vinn
Fiber network owner Zayo Group and the private equity firm TPG are vying to acquire the fiber and wireless assets of Crown Castle, with the potential deal being valued at close to $10 billion, as confirmed by sources familiar with the negotiations who requested anonymity due to the confidential nature of the discussions.
Current Bidders
Zayo, which is owned by EQT AB and DigitalBridge, along with TPG, are the final contenders for these valuable assets, which encompass Crown Castle’s fiber business and its small cell division, providing essential wireless services and technology.
Valuation and Potential Outcomes
Each of these business units is estimated to be worth less than $5 billion. It remains a possibility that Crown Castle may decide to sell only one of these assets. Should both units be sold, the transaction is anticipated to fall between $8 billion and $10 billion. Sources have indicated that the finalization of any deal is still weeks away, with uncertainty surrounding the outcome as a potential third bidder could emerge, and an agreement may not be achieved.
Market Context
The fiber industry is currently experiencing an uptick in mergers and acquisitions, driven by the rapid expansion of fiber broadband, which significantly boosts infrastructure providers’ market appeal. This context underscores the attractiveness of the assets being discussed.
Crown Castle’s Position
Boulder, Colorado-based Crown Castle is a prominent telecommunications infrastructure provider, managing over 40,000 cellular towers across the United States. Despite having a market valuation of approximately $52 billion and growing its fiber business through multiple acquisitions since entering the sector in 2015, the high expenses associated with building fiber infrastructure have adversely impacted its financial health. Consequently, the company is contemplating a strategic retreat from its fiber operations and reducing its expenditures.
Future Focus and Corporate Strategy
Crown Castle, which leases its towers to leading wireless carriers such as Verizon and AT&T, is aiming to concentrate on enhancing its tower business. This segment is projected to benefit from significant investments as major U.S. carriers upgrade their networks to 5G technology to accommodate soaring data consumption.
The company is actively exploring options regarding its fiber assets in light of a restructuring agreement with activist investor Elliott Investment Management concerning board changes.
Financial Adjustments
In a recent statement, Crown Castle‘s co-founder, Ted Miller, indicated that the company could realize approximately $15 billion from selling its fiber assets, contingent upon allowing him and his partners to join the board of directors.
Furthermore, in June, the company downgraded its annual profit expectations and announced a 10% workforce reduction, following an operational review of its fiber division.
Zayo’s Background
Zayo was taken private in 2019 by the infrastructure fund of EQT and DigitalBridge, previously known as Digital Colony. The company operates an extensive 145,000-mile fiber network across North America and Canada, connecting various stakeholders, including wireless carriers, cloud service providers, data centers, and major corporations.
