The most recent movements in the mergers and acquisition market don’t have anything to do with tower purchases but with fiber optics.
Yesterday, we learned that ExteNet Systems plans to acquire MetroFiber d/b/a Axiom Fiber Networks, which is a telecommunications infrastructure services provider operating in the greater New York City metropolitan region. Before the acquisition, the company had 250 route miles in New York. It will be closing in on 2,000 small cell nodes in the area by the end of the year.
Crown Castle International, which has 50,000 small cells on the air or under development, intends to acquire LighTower (LTS Group Holdings) from Berkshire Partners, Pamlico Capital, for, which owns or has rights to approximately 32,000 route miles of fiber located primarily in top metro markets in the Northeast. The company will cost Crown $7.1 billion in cash, which it will finance, in part, by selling $1.73 billion in senior notes.
“With a fiber footprint after the transaction that will cover 23 of the top 25 most populous U.S. markets, Crown Castle is well-positioned to capitalize on the growing demand for mobile connectivity as network architecture continues to evolve and bandwidth demands continue to increase,” according to Crown Castle.
The transaction will double Crown Castle’s metro fiber footprint, resulting in it owning or having rights to 60,000 route miles of fiber, making it one of the largest owners of metro fiber in the United States.
The purchase of LighTower “significantly increases opportunities for small cell network deployments in top metro markets in the Northeast including Boston, New York, and Philadelphia,” according to Crown Castle.
CommScope to Acquire Cable Exchange
An example of the OEM market gearing up for the fiber-optic future in general and data centers in particular, CommScope plans to acquire Cable Exchange, a privately held quick-turn supplier of fiber optic and copper assemblies for data, voice and video communications.
Cable Exchange, headquartered in Santa Ana, California, manufactures a variety of fiber optic and copper cables, trunks and related products used in high-capacity data centers and other business enterprise applications.
“This highly complementary acquisition will deepen CommScope’s capabilities in supporting the growing market for high-capacity, multi-tenant data centers and hyperscale data centers operated by the world’s largest technology and retail companies,” CommScope said. “As more user-driven information and commerce flows through networks, operators are quickly deploying larger and more complex data centers to support growth in traffic and transactions.”
Remember, during the second-quarter of this year, Verizon announced fiber purchases from Corning and Prysmian Group in order to deliver new fiber services, including 5G, and supporting small-cell deployment.
June 20, 2016
As the industry works to determine the path to a 5G standard, there already exists plenty to do to increase the speeds and reduce the latency of wireless networks. It will require the deployment of small cells, fiber optics, wireless backhaul, high-tech antennas and the internet of things (IoT). Any technological change comes with the need to create the infrastructure to support service providers that are eager to meet the demand for high bandwidth and speed, and 5G wireless communications is no different.
Lay a Fiber Stake in the Ground
The only way the 5G revolution can occur is if service providers understand the role that fiber will play. Fiber is the backbone that 5G will use to make the final connection with the consumer successful. 5G will need a robust infrastructure to provide high-speed, high-density connectivity to the masses, while providing allocated bandwidth for offloading data within a short distance. The key will be the implementation of small cell configurations to help increase the network’s capacity and density, which will support backhaul from the sites themselves. Tier-1 carriers such as AT&T, Verizon, Sprint and others have all made efforts to incorporate small cells into their network builds, deployments and upgrades. Small cells — femtocells, metrocells, microcells and picocells — when placed into an existing network, can significantly increase the amount of throughput and total network bandwidth. This, in turn, gives the service provider the flexibility it needs to effectively provide hotspots that feature denser connectivity possibilities. To succeed in providing the backhaul necessary to support the 5G network, small cell backhaul capability must be expanded.
There are several considerations to review before service providers can go down this road. For one thing, service providers must understand and clarify how much speed and capacity they will need to meet the demand of their customers. Short-term and long-term needs must be factored into these decisions. Also, service providers must calculate how quickly they will be able to turn up small cell deployments, and what role fiber will play in meeting their time-to-market goals.
Simplifying the installation process will also be a priority. Service providers also have to take into account the disruptive nature of fiber deployments, especially in urban environments, because much of the infrastructure is located underground or in cabinets next to busy streets.
There is no one-size-fits-all infrastructure for fiber deployments. Therefore, implementing scalable and modular standardized solutions into their networks ensures that carriers are able to maximize their network elements as they adapt and evolve those networks.
Another element for service providers to take into consideration is that they will need to move toward plug-and-play solutions that do not require skilled labor for deploying fiber. Lowering labor costs means service providers will be able to back more individual deployments that will support small cell deployment and backhaul for 5G.
The current 4G network infrastructure that provides 4G LTE connectivity can still be used to provide 5G. However, the overall wireless infrastructure will need many additions to support the 5G speeds. Currently, 4G LTE occupies the frequency bands up to 20 MHz. 5G is expected to sit on or around the 6-Hz band. While this means far more information will be able to cross back and forth over these frequencies than 4G LTE, it also means the signal will not travel nearly as far. Providing this connectivity over the existing 4G LTE network will not be sufficient to supply 5G to existing customers. Wireless service providers will need to build more cell towers capable of handling the amount of information 5G will be carrying across the network, along with adding new base stations and mounted antennas to capture signals. In addition, the access network is the one part of the global network infrastructure that still has a significant amount of copper and wireless technology deployed, which makes it important to lay fiber now.
Fiber will provide the foundation for the pipeline to backhaul from macro sites — tower and rooftop connection points — ensuring a flawless and complete 5G experience for the consumer. The fiber infrastructure will also provide the reliable and secure network needed to support IoT and other applications that will be able to run only on a 5G connection. Smart homes, city infrastructure, governments and millions of consumers around the globe will be relying on a robust 5G network to power the applications required to run their individual operations.
Financial and Market Considerations
Customer demand for faster and better service means service providers will be doubling down on efforts to bring 5G technology to fruition even faster than originally expected. Ensuring customers have a seamless transition and use of the 5G network will be paramount, not only from an expectation standpoint, but also from a financial perspective. Deploying 5G before the infrastructure is in place to handle it would seriously jeopardize adoption of the technology, throwing service providers’ existing and growing 5G networks and deployments into doubt. By solving the fiber challenge now, service providers will be able to maintain a high quality of service for their 5G networks as they are introduced and will be able to provide that much-needed network support backbone.
Fiber will allow 5G providers to service a broad variety of customers, including fixed-line and business, as well as to connect the mobile base stations that provide the critical last-mile connectivity needed to reach end-users. Fiber will pave the roads that 5G, once implemented, will be using every day. Service providers should prepare now to meet the challenges they will face to ensure their 5G deployments are successful.
Scot Bohaychyk, senior application engineer at Clearfield, has nearly 30 years in the telecommunications industry. His background includes serving in the White House Communications Agency, providing communications infrastructure support for President Ronald Reagan and his White House staff. Bohaychyk’s private-sector experience includes outside plant field and engineering experience, along with market development and sales work for blown and pushable fiber for long-haul fiber installations.
Corning and Zhone Technologies have agreed to co-market an all-fiber network solution capable of deploying passive optical local area network (POL) and cellular DAS on a common infrastructure –– Corning’s ONE Wireless Platform. The result will be quicker installation, a smaller equipment footprint, and lower cost for enterprise companies. In the past, companies needed to use solutions from multiple vendors to build separate information technology and cellular networks. Leveraging Zhone’s innovative POL solution, FiberLAN, and Corning’s ONE Wireless Platform, customers can now deploy an integrated fiber network solution that includes both the electronics and passive fiber optic components in one converged solution. www.corning.com
“Business Services is a key growth area for Time Warner Cable and this acquisition will greatly enhance our already growing fiber network to better serve customers, particularly those in key markets in the Carolinas”
DukeNet, based in Charlotte, N.C., is a regional fiber optic network company serving customers in North Carolina and South Carolina, as well as five other states in the Southeast. With a fiber optic network of over 8,700 miles, DukeNet provides data and high-capacity bandwidth services to wireless carrier, data center, government, and enterprise customers. Duke Energy owns 50 percent of DukeNet. The Alinda investment funds own the remaining 50 percent.
“Business Services is a key growth area for Time Warner Cable and this acquisition will greatly enhance our already growing fiber network to better serve customers, particularly those in key markets in the Carolinas,” said Phil Meeks, Executive Vice President and COO of Business Services for Time Warner Cable. “This acquisition will help us expand our fiber footprint at a price that is consistent with our disciplined approach to M&A, accounting for expected synergies and tax benefits.”
“This is a positive transaction for Duke Energy,” said Marc Manly, president of Duke Energy’s Commercial Business group. “The sale completes Duke Energy’s transition out of DukeNet, which although a growing operation, is a non-core business to our company.”
“We are pleased to have been co-owner of DukeNet and partner with Duke Energy through a very exciting time in the development of telecommunications infrastructure generally, and DukeNet’s business specifically,” said Alinda’s managing partner, Chris Beale. “We believe DukeNet is well-positioned to continue its record of strong growth.”
The transaction, which is expected to close in the first quarter of 2014, is subject to various customary closing conditions, including receipt of regulatory approvals. RBC Capital Markets, LLC advised Duke Energy and Alinda on the sale of DukeNet, and Moore & Van Allen PLLC provided legal counsel. Edwards Wildman Palmer LLP provided legal counsel to Time Warner Cable.
About Time Warner Cable
Time Warner Cable Inc. (NYSE:TWC) is among the largest providers of video, high-speed data and voice services in the United States, connecting more than 15 million customers to entertainment, information and each other. Time Warner Cable Business Class offers data, video and voice services to businesses of all sizes, cell tower backhaul services to wireless carriers and enterprise-class, cloud-enabled hosting, managed applications and services. Time Warner Cable Media, the advertising arm of Time Warner Cable, offers national, regional and local companies innovative advertising solutions. More information about the services of Time Warner Cable is available at www.twc.com, www.twcbc.com and www.twcmedia.com.
About Duke Energy
Duke Energy is the largest electric power holding company in the United States with more than $110 billion in total assets. Its regulated utility operations serve approximately 7.2 million electric customers located in six states in the Southeast and Midwest. Its commercial power and international business segments own and operate diverse power generation assets in North America and Latin America, including a growing portfolio of renewable energy assets in the United States. Headquartered in Charlotte, N.C., Duke Energy is a Fortune 250 company traded on the New York Stock Exchange under the symbol DUK. More information about the company is available at: www.duke-energy.com.
About Alinda Capital Partners
Alinda Capital Partners is one of the world’s largest infrastructure investment firms with approximately $7.8 billion in equity commitments to infrastructure investments. Alinda has invested in infrastructure businesses that operate in 31 states in the United States as well as in Canada, the United Kingdom, Germany, the Netherlands, Austria, Belgium and Luxembourg. These businesses serve 100 million customers annually in more than 400 cities globally and employ more than 15,000 people. Alinda’s investors are predominantly pension funds for public sector and private sector workers and include some of the largest institutional investors in the world. Alinda and its subsidiaries have two offices in the United States — in Greenwich, Conn., and Houston — and two offices in Europe — London and Düsseldorf, Germany. More information about Alinda is available at: www.alinda.com.
Time Warner Cable Caution Concerning Forward-Looking Statements
This document includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations or beliefs, and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive, technological, strategic and/or regulatory factors, and other factors affecting the operations of Time Warner Cable Inc. More detailed information about these factors may be found in filings by Time Warner Cable Inc. with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Time Warner Cable is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Duke Energy Cautionary Statements Regarding Forward-Looking Information
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions.
These forward-looking statements are identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook” and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include but are not limited to: state, federal and foreign legislative and regulatory initiatives, the possibility that the impact of compliance with material conditions imposed by regulators related to the Progress Energy merger could exceed our expectations, continued industry consolidation, the timing and extent of changes in commodity price, interest rates and foreign currency exchange rates and the ability to recover such costs through the regulatory process, where appropriate, the results of financing efforts and the ability to obtain financing on favorable terms which can be affected by various factors, including credit ratings and general economic conditions, and the ability to successfully complete future merger, acquisition or divestiture plans.
Additional risks and uncertainties are identified and discussed in Duke Energy’s and its subsidiaries’ reports filed with the SEC and available at the SEC’s website at www.sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than Duke Energy has described. Duke Energy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.