ExteNet Systems has successfully issued $368 million principal amount of securitized notes and $75 million principal amount of an undrawn variable funding note. This transaction is the first ever asset-backed securitization financing for a portfolio entirely comprised of distributed wireless network solution assets. The securitized notes are rated by Kroll Bond Ratings Agency and Moody’s Investor Services. Proceeds of the offering will be used to repay ExteNet’s current outstanding indebtedness and for general corporate purposes. Concurrently, ExteNet completed a refinancing of its senior secured credit facility.
“ExteNet is experiencing tremendous growth as the major wireless carriers accelerate deployment of 5G services. Through this securitization financing ExteNet has accessed a deep and liquid institutional market and created a platform for future issuance. We’ve been thrilled with the response from the investment community,” said Jim Hyde, president and CEO of ExteNet Systems. “The securitization transaction combined with our existing bank credit facilities provides us with significant capacity to finance our growth in existing and new markets as we continue to build out the network of the future including 5G and IoT, which we believe is the Infrastructure of Things.”
The notes, which were sold at par, are comprised of three tranches: a $263 million tranche, rated A- by Kroll and A3 by Moody’s; a $39 million tranche, rated BBB- by Kroll and Baa3 by Moody’s; and a $66 million tranche, rated BB- by Kroll only.
The notes have not been, and will not be registered, under the Securities Act of 1933, as amended, and may not be offered or sold absent such registration, or an applicable exemption from the registration requirements thereunder. This press release is neither an offer to sell, nor a solicitation of an offer to buy any notes, nor shall there be any sale of the notes in any state or jurisdiction in which the offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
Each company had reason to cheer, as the U.S. District Court for the Northern District of Texas in Dallas ruled last Wednesday on the patent lawsuits filed by CommScope and Dali Wireless.
The jury found that Dali willfully infringed each of the five asserted CommScope patents (U.S. patent No. 7,848,747; U.S. patent No. 7,639,982; U.S. patent No. 8,326,218; U.S. patent No. 8,577,286; U.S. patent No. 9,332,402) with its t-Series and Matrix products. Alternatively, the CommScope ION-E and FlexWave Prism products were found to infringe Dali Wireless digital radio distribution and digital predistortion patents (U.S. Patent Nos. 9,031,521 and 9,531,473).
Dali had also earlier asserted infringement on U.S. Patent No. 8,149,950 in this litigation, but the parties settled that claim when Texas Instruments—CommScope’s supplier on the relevant chip—entered into an agreement with Dali to license the patent.
The jury awarded $9 million in damages to Dali Wireless and $1.98 million to CommScope, based on the relevant sales of the accused products.
“Dali’s commitment to innovation has resulted in over 450 patents and pending patents which are critically important to enabling 4G, 5G and virtual Radio Access Network (vRAN),” Dr. Albert Lee, CEO of Dali Wireless, said, in a prepared release.
It’s not Over
CommScope still expects the court will enter an injunction barring Dali from selling the t-Series and Matrix products in the United States. Further, due to the jury’s finding that Dali “willfully” infringed each of CommScope’s five patents, CommScope will request treble damages and an award of its fees associated with bringing the action.
“We will continue to protect and defend CommScope’s intellectual property while delivering innovative products and solutions to help our customers succeed in their markets,” said Matt Melester, senior vice president, office of the CTO for CommScope.
The case remains alive at the Patent Trial and Appeal Board (PTAB). A final decision is expected from in August from the PTAB, which granted CommScope’s petition to institute an inter partes review challenging the validity of one of Dali’s patents asserted in the Texas action relating to digital distributed antenna systems.
Likewise, Dali has also recently filed another lawsuit (1:19-cv-00952-MN) against CommScope in U.S. District Court for the District of Delaware to enforce other patents (U.S. Patent Nos. 8,682,338; 9,847,816; 10,045,314; and 10,080,178) that cover Dali Wireless’ wireless distribution systems. It is seeking damages and an injunction to stop manufacturing, sale, and distribution of CommScope OneCell and ION-E products, which are also marketed as “Era C-RAN antenna system.” The Delaware case is still pending.
Video is the largest technology difference spurring wireless infrastructure growth over the last several years, according to Jason Caliento, executive vice president of network strategy at Mobilitie. That is not surprising, considering that every grandparent expects a daily update on junior on his or her cell phone, and teenagers now routinely watch feature length movies on their phones. Caliento creates partnerships with cities, venues and carriers to design and build advanced wireless solutions that can handle this traffic.
Mobilitie owns, operates and has deployed billions of dollars’ worth of wireless infrastructure, making it the largest privately held owner of wireless infrastructure and one of the largest wireless service firms in the United States.
Increasing consumption of video and other high-bandwidth applications led Mobilitie to focus on finding how to participate in that the heterogeneous network of towers, small cells, in-building wireless systems and fiber-optic cable routes that connect wireless devices with the internet, Caliento said. He spoke at the AGL Local Summit in Newport Beach, California, on Jan. 24.
“As the iPhone developed and as our use of Netflix and other video-based applications continues to grow, wireless carriers faced a big problem,” Caliento said. “It is important for our business and our strategy to participate in the entire wireless infrastructure ecosystem to ensure that customer requirements are taken care of seamlessly.”
Mobilitie owns the distributed antenna system (DAS) network at Arrowhead Stadium where the Kansas City Chiefs played the Indianapolis Colts on Jan. 11 in a divisional playoff football game. “The traffic on our DAS in the last couple of minutes of the game was all upload,” Caliento said. “Fans wanted to show that they were at the game and wanted to send video highlights. That is an example of how we interact with devices and social media.”
Towers Still Have Value
Even with growth in DAS and small cells, Mobilitie continues to build telecommunications towers. Caliento said towers offer the most efficient way to deploy broadband wireless services. He said that rural areas especially rely on towers for network services, including backhaul. Some challenges include accessing adequate construction capital and making sure multiples are in line, he said, adding that good towers always will have value. “Multiple” refers to a number used to multiply a tower’s cash flow to establish the tower’s value. Higher prices for towers imply higher multiples.
DAS remains a robust business for Mobilitie, Caliento said, although it presents different challenges than it did a few years ago. He said the challenges come with fans wanting to upload and download information and with the use of virtual reality video applications. Meanwhile, the wireless carriers find that they are unable to fund all of the DAS development, Caliento said. Outside of large public venues that are fairly unique, he said, DAS development includes commercial buildings and large public spaces.
Whether landlords pay for DAS equipment and installation comes down to what Caliento called nuanced deal-making based on specific needs. “Most enterprises today have a rise of mobile work applications,” he said. “They want their people to be enabled with really good cellular reception. Many enterprises will ask for in-building wireless service as a condition of a lease. When that happens, you will see more DAS development flow from enterprise demand. How that gets paid for winds up being the question.”
A large player in the small cell business, Mobilitie has built more than 1,000 small cells in Los Angeles and several hundred in San Diego and Santa Monica, California, Caliento said. He said Mobilitie builds small cells throughout the United States, from the largest cities to the smaller cities. In developing small cells, Caliento said what has been successful for Mobilitie is collaborating with the cities and making public-private partnerships, especially in the larger cities.
Another step that leads to successful deployment is communicating with city officials about small cell height, location and design early on in the permit application process.
How much cities charge to process permit applications plays a role in how wireless carriers use their capital most efficiently. If the carriers cannot be capital-efficient, Caliento said, their businesses fall apart.
“Mobilitie’s position has always been that application fees and recurring fees for using space in the cities’ rights of way needs to be tied to what it costs the cities,” Caliento said. “When those fees are in line, that’s the right public policy.”
Caliento discussed the small cell order adopted by the FCC on Sept. 26, 2018, that addressed what fees cities may charge. He said that opinions differ on the FCC’s position. “The dollar amounts the FCC specified may be proper for some cities, but in other cities, that’s not the case,” he said. “The fees need to be higher because the city’s true costs of processing are higher.” Mobilitie, he said, pays the fees when it is clear that they are in line with the cities’ costs.
Early Communication Is Key
Caliento said Mobilitie has achieved success by ensuring early communication with city officials about permit applications and the payment of fees. “There are still places where I’m confounded by resistance, where there are cities that resist even the notion of outside investment,” he said. “But that is a smaller and smaller population each year that we do this.”
Sometimes resistance comes from a specific leader, Caliento said, or from a specific group that is vocal. Mentioning Southern California because he was speaking in Newport Beach, he said the region has communities with robust business environments, and they clamor for advanced services from wireless carriers. He said resistance is what led the carriers to push the matter with the FCC, resulting in the small cell order.
“We will see it play out in the U.S. Court of Appeals for the Ninth Circuit,” Caliento said. “But in terms of bringing this back to the business fundamentals, we’ll be committed to building small cells throughout the United States in partnership with the cities.”
Marc Ganzi’s vision of diversification took another big step yesterday as his global investment firm Digital Colony purchased fiber optic network provider Zayo Group, with the help of EQT Infrastructure IV fund, in a transaction valued at $14.3 billion. Zayo will transition from a public company to a private company but remain headquartered in Boulder, Colorado. The deal is subject to regulatory and shareholder approval.
Jennifer Fritzsche, senior analyst, Wells Fargo Securities, said. “Ultimately, we believe ZAYO will be a valuable asset within the acquirers’ portfolios and create natural synergies with their other investments. Digital Colony, through its partner Digital Bridge, touches many of the converging parts of the communications infrastructure ecosystem.”
Digital Colony is a combination of Digital Bridge Holdings, which is headed by Ganzi, and Colony Capital, a real estate investment management firm. Digital Bridge is a holding company that is quite diversified, owning Vertical Bridge, Mexico Tower Partners, ExteNet Systems, Databank, Vantage Data Centers and Andean Tower Partners.
As a global investment firm, Digital Colony focuses on next generation mobile and internet infrastructure – towers, data centers, small cells, and fiber.
Ganzi said, “Zayo has a world-class digital infrastructure portfolio, including a highly-dense fiber network in some of the world’s most important metro markets. We believe the company has a unique opportunity to meet the growing demand for data associated with the connectivity and backhaul requirements of a range of customers.”
Goldman Sachs and J.P. Morgan are serving as financial advisors to Zayo Group in connection with the transaction and Skadden Arps is serving as legal counsel. Morgan Stanley and Deutsche Bank are acting as financial advisors to Digital Colony and EQT Infrastructure, and Simpson Thacher is serving as legal advisor.
Spencer Kern, analyst, New Street Research, said the transaction was bad news for Crown Castle International. First, the pricing of transaction has negative implications because the implied multiple on Zayo’s fiber is 7x lower than the multiple placed on CCI’s fiber by the market.
“We don’t see any reasons why CCI’s fiber should trade at such a high premium to Zayo’s; at the multiple implied by the Zayo transaction, we see 8 percent downside to CCI’s stock price,” Kern wrote. “Second, the new ownership of Zayo could drive greater competition in small cells, putting pressure on CCI’s small cells win-rate, pricing, or both.”
A Busy Year for Digital Colony
Since its inception, Digital Colony has aggressively moved forward on Ganzi’s vision of diversification, with a particular emphasis on the United Kingdom. Last August, Digital Colony entered the U.K. indoor DAS and small cell market with an investment in Stratto, which offers an Infrastructure-as-a-Service business model.
On April 29 of 2019, the global investment firm announced further growth of its U.K. platform through the acquisition of iWireless Solutions, a small cell provider that serves large, high profile venues in the U.K. (London Olympic Stadium, Twickenham Stadium).
Last November, Digital Colony purchased Opencell, which provides multi-operator indoor coverage and currently has more than 2,000 cells across 100 networks that are used by all four U.K. mobile network operators. Opencell was then merged with Stratto.
“Our goal from day one has been to build the leading digital infrastructure platform that delivers exceptional indoor and outdoor network solutions to the mobile network operators in the U.K.; combining Opencell’s capabilities and active networks with the Stratto platform helps us accelerate those goals,” said Ganzi, in a November 2018 press release. “We look forward to continuing to strengthen our relationships with our customers as well as positioning Digital Colony’s U.K. digital infrastructure platform as the recognized leader in the small cell sector.”
Outside the United Kingdom, Digital Colony Buys Fiber, Towers
Elsewhere in the world, Digital Colony has reached out and planted it flag. Last week, Digital Colony closed on the acquisition of Toronto-based, Cogeco Peer 1, a provider of colocation, network connectivity and managed services company. Cogeco Peer 1’s fiber business, which currently encompass more than 2,050 route miles of owned, dense metro fiber in Canada’s two largest urban markets, plans to become the country’s first neutral-host provider of small cell and 5G infrastructure and enterprise and wholesale fiber connectivity.
At the end of just Digital Colony completed its acquisition of Helsinki, Finland-based Digita Oy, which owns and operates the nationwide digital terrestrial television and radio broadcasting tower infrastructure network in Finland and is the largest independent owner of telecom towers in the country.
Massive events demand massive wireless. Sprawling across the Palm Springs desert in Southern California, the recently completed The Coachella Music and Arts Festival and the StageCoach Festival brought together hundreds of music acts and nearly 900,000 people, who communicated over a massive state-of-the-art DAS.
“This is the most complex design that I have seen in my career because it is a unique venue to begin with. Not to mention that Empire Polo Club is very particular about aesthetics,” said John Shubin, Advanced RF Technologies director of business development. “Because of the flat land underneath the Empire Polo Club, you have to get creative in sectorizing the DAS.
“You also have to take into account that there are multiple stages and some of them move around from one weekend to the next. There are also a lot of temporary structures that you have to account for,” he added.
Just designing Phase Two took six months and required some the best integrators in the business, including Communications Technology Services, Aztecs and Wes-Tec, as well as Pramira and Airtech.
“Something this large, and because of the time crunch, required top integrators working on the install of this project,” Shubin said. “We had the biggest, best and brightest integrators. They were all working together from the installation to optimization and commissioning.”
Coachella took place in April during two three-day weekends and then StageCoach ran the next weekend. The system gets a heavy work out during the festivals, providing service to the 99,000 music lovers per-day per day during the six days of Coachella, according to Goldenvoice, and to StageCoach’s 70,000 festival goers daily over three days.
In the previous years, communications needs were served by cells on wheels (COW). Last year, known as Phase One, marked the first year the festivals brought in Advanced RF Technologies’ DAS, which provided 39 single-in single out (SISO) sectors and was used by Verizon and T-Mobile. This year, the DAS grew to 82 multiple-in, multiple-out (MIMO) sectors for Verizon and T-Mobile and 39 single-in, single out (SISO) sectors for AT&T.
“We had to get creative about what we put out there. In the past the carriers just brought in COWs, but that was not meeting the communications needs of the festival goers. In stage one, they used some DAS using permanent poles, but it wasn’t enough,” Shubin said.
This year was called Phase Two and it brought in a slew of permanent poles, temporary poles and charging stations. “They really made it robust,” Shubin said. “A robust system is needed for that large of an audience.” In Phase Three, next year, AT&T will expand and maybe Sprint will join, depending on the fate of the T-Mobile merger.
Additional carriers can be added through the modular nature of ADRF Technologies’ ADXV series, which transmits from 600 MHz to 2600 MHz plus VHF and UHF frequencies. ADRF’s Citizen’s Broadband Radio Services (CBRS) module can also be added if needed in the future.
“The modularity of our fiber DAS, being able to add and remove frequency bands at will, was a differentiator for ADRF,” Shubin said.
The coverage demand of nearly 100,000 people is only half the battle. In Indio, California, the network is subjected to severe heat, rain and even sand storms. The equipment’s IP66 rating is a sign that it is built to survive the climate and continue to operate.
“Last summer, in two different instances, the HVAC went out in the headend causing temperatures to soar to 138 degrees, and our equipment was still performing well,” Shubin said.