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Rich Coyle to Replace Jim Hyde at ExteNet Systems Helm

By Don Bishop

Rich Coyle (left), appointed as president and interim CEO of ExteNet Systems effective on July 30, and outgoing president and CEO Jim Hyde.

ExteNet Systems, a privately held provider of converged communications infrastructure and services for outdoor and in-building wireless, optical fiber and other connectivity, will be led by a new president and interim CEO beginning July 30. Rich Coyle, the company’s chief operating officer, moves up to the post as Jim Hyde, who has served as president and CEO three years, exits the company. Hyde said he would be focusing on family and other personal interests while working alongside ExteNet Systems part-owners DigitalBridge and Stonepeak on investment opportunities. Another ExteNet Systems executive, Chief Technology Officer Tormod Larsen, left the company on May 14 after 16 years.

“Since joining ExteNet as chief operating officer (COO) in September 2018, Coyle has transformed the operations team at ExteNet while achieving two sequential years of record node activations in 2019 and 2020, the latter during the ongoing pandemic,” a statement from the company reads.

Coyle said that with 5G wireless communications in the early stages of a multiyear investment cycle, network densification and advanced connectivity would remain the primary focus for carriers, real estate owners and enterprises in the coming years.

“We pride ourselves in our ability to deliver next-generation, future-proof public and private networks in a rapid and cost-effective manner,” Coyle said. “I am honored to take on this new role and want to assure our customers that we remain laser-focused on innovation, best-in-class network delivery and superior service.”

ExteNet System’s executive chairman, Marc Ganzi, said that he has admired Coyle for his leadership as ExteNet built operational capabilities while delivering on 4G and 5G node activation commitments for mobile network operator customers during the past three years. Ganzi, who also heads DigitalBridge, said that he thanked Hyde for contributions in growing ExteNet’s revenue and asset portfolio, implementing new platforms and processes, upgrading human capital and bringing in new equity partners.

“The future is bright for ExteNet,” Ganzi said.

Background information provided by ExteNet Systems describes its customers as mobile network operators, real estate owners, property managers, wholesale carriers, enterprises, municipalities and rural carriers.

“Our outdoor small cell and DAS networks are deployed in a variety of urban, suburban and rural environments while indoor networks are deployed in iconic sports and entertainment venues, convention centers, commercial office buildings, college campuses, healthcare facilities, hotels and resorts, and transit systems nationwide,” a company statement reads.

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Don Bishop is executive editor and associate publisher of AGL Magazine.

ExteNet Systems Announces Successful Closing of Manulife Investment

ExteNet Systems, a private owner and operator of converged communications infrastructure delivering advanced mobility and fiber connectivity, has closed its previously announced strategic investment by Manulife Investment Management. Manulife Investment Management’s commitment was sourced for the John Hancock Life Insurance Company (U.S.A.) balance sheet as well as third-party managed accounts. Manulife Investment Management joins existing major investors, Digital Colony and Stonepeak Infrastructure Partners, with this transaction. The investment provides the Manulife-led consortium approximately 30 percent ownership of ExteNet. ExteNet plans to use the capital infusion in ongoing 5G network densification as it continues to address advanced connectivity needs of its customers, including mobile network operators (MNOs), carriers, property owners and enterprises.

“Manulife Investment Management is an invaluable addition to ExteNet’s investor group as we continue to build and operate high-performance next-generation communications infrastructure nationwide,” said Marc Ganzi, executive chairman of ExteNet. “We look forward to working with the Manulife team to accelerate ExteNet’s next phase of growth and deliver tomorrow’s connectivity today.”

Brian McMullen, a partner at Stonepeak, said that in an increasingly connected society, ExteNet’s integrated portfolio of innovative, advanced connectivity solutions positions the company at the forefront of the ongoing 5G digital transformation. “Our partnership with Manulife Investment Management will allow us to extend our market leadership and capture the significant opportunities ahead,” he said.

Steve Blewitt, global head of private markets at Manulife Investment Management, said that with the robust 5G demand drivers for small cell and DAS networks, ExteNet is well-positioned to remain what he called the leading independent provider in that business. “Manulife is looking forward to working alongside ExteNet’s world-class team to deliver next generation communications infrastructure and services to create enhanced value for all our stakeholders,” he said.

Jim Hyde, president and CEO at ExteNet, said that the successful Citizens Broadband Radio Service (CBRS) and C-band spectrum auctions served as validation for the future of 5G wireless communications. He said that ExteNet’s technical leadership, customer-first and solution-focused approach sets it apart. Hyde indicated that he considers Manulife Investment Management to be a partner with ExteNet in building the next-generation communications infrastructure as the company continues to roll out its Fiber-First enterprise fiber services. He said that Fiber-First “ensures that the underlying infrastructure is robust, scalable and carrier-grade, to deliver advanced connectivity for businesses and communities across the United States.”

PJT Partners served as financial advisors to ExteNet and its investors. TAP Advisors served as financial advisors to Manulife Investment Management. Simpson, Thacher & Bartlett provided legal representation to ExteNet, and Paul, Weiss, Rifkind, Wharton & Garrison represented Manulife Investment Management. Financial terms of the transaction are not being disclosed.

 

How Telecom Towers, Fiber Fit Into a Digital Real Estate World

By Don Bishop, executive editor, associate publisher, AGL Magazine

High single-digit and low double-digit growth now are found in different places than towers and fiber. Nevertheless, towers sustain respectable growth, while fiber continues to be super-competitive.

 

Ganzi

The way tower companies have been built is with a historic view that they have to dominate that one space, according to Marc Ganzi, CEO of Digital Colony Management and president and CEO of Colony Capital, a global digital infrastructure, real estate and investment management firm with 15 digital portfolio companies, 350 employees and $47 billion worth of assets under management. However, Ganzi said that tower customers’ needs are changing, and the networks they serve are changing, too. Ganzi spoke about telecommunications towers and digital real estate at a Connected Virtual Tech Event presented by Fifth Gen Media.

Regarding towers, Ganzi said that today, site acquisition specialists do not receive from mobile network operators a search ring as they did before. “It’s not like, ‘Here’s a polygon; go work it. Go bring me back three candidates,’” he said.

Ganzi said an inquiry these days is more likely to say something like, “I have 26 polygons.  My standard deviation is 500 yards. I need 14 to 18 strands of fiber. By the way, I am going to put remote access units (RAUs) on top of all this. I don’t care if it is a tower or a utility pole. Here are my coverage specifications. By the way, we are fronthauling this back. You have to find me a radio access network (RAN) hub where I am going to have 3,500 square feet. Here are my technical standards for my RAN hub. And here is another list of technical standards for my cloud partner, who, by the way, is Amazon Web Services (AWS), and you have to create an ecosystem for them, too.”

At this point, Ganzi said, if you are a tower operator, “your mind just blows, because what you have just been handed is a mesh network that is going to interface and ultimately deploy multiple-input, multiple output (MIMO) technology. The only way you can deploy MIMO is with multiple radio access point networks, where there is a small cell node, a Wi-Fi access point — whatever it is, it is all coming back to a point of aggregation. That point of aggregation is called decentralized RAN. The radio access network is now being decentralized.”

Network operators are not building $250 million Ericsson switches anymore, Ganzi said. Those were back in the days when they were building 2G and 3G networks, he explained, but that sort of construction is just not happening, anymore. “The infrastructure is lighter,” he said. “It is more nimble. The ability to design and proliferate those networks requires a totally different abacus than what we were dealing with before.”

Digital Colony is going in that direction, and Ganzi said the evidence is reflected in the work the company performs on edge computing and small cell infrastructure side, and is reflected by the amount of fiber Digital Colony bought with its acquisition of Zayo Group Holdings for $8.2 billion in partnership with EQT.

“We are prepping ourselves for a different kind of battle,” Ganzi said. “We are going to play the game differently from the way we played it before. I don’t know if our industry is adapting fast enough, which is why you are seeing more carriers self-performing than ever around their 5G architecture.”

Nevertheless, towers are still great, Ganzi said. “American Tower is not going to go out of business because they whiffed on Cloud-RAN,” he said. “Equinix is not going to go out of business because they missed on edge computing. All these are great, well-run, multibillion-dollar companies that are built for the future.  However, the good growth, the high single-digit, low double-digit growth, is in a different place, now.  If you want to chase that, you have to go one way. If you want 3 percent to 4 percent growth, you go another way.”

Rich Berliner of Fifth Gen Media asked Ganzi a question related to why industry analysts have more praise for Digital Colony’s fiber-optic cable assets than for those owned by tower operator Crown Castle International. Ganzi said that for Crown, the difficulty involves storytelling. He said that Crown is beginning to give a lot more disclosure about its fiber business. What many do not understand, Ganzi said, is that unlike towers, fiber has multiple different types of businesses.

“You can go invest in infrastructure, which is the part that Jay loves,” Ganzi said, referring to Jay Brown, CEO of Crown. “Infrastructure includes long-term leases, long-haul metro rings, fiber to the tower and fiber to the node. Those four verticals are performing really well for Crown. They are having a lot of success in their long-haul routes, their metro rings, and their fiber-to-the-tower business and their small cell business. Where Crown has gotten a little bit sideways is with its enterprise business.”

The enterprise fiber business is super-competitive, Ganzi said he tells everyone. He said it is hard to be successful in enterprise fiber “because there is no privacy in having that great, zoned tower where, for example, you are driving down the Garden State Parkway, and there is this one pine tree that you got zoned that no one else could get zoned. You know how that ends. It ends with four rad centers and a tower that is doing $180,000 cash flow.”

In comparison, Ganzi said, “you go run fiber down the middle of Paramus, New Jersey, and there will be four or five competitors running down that conduit. If I have a 100,000-square-foot office building, and I have a curb cut with five providers, Crown being one of them, that is just a race to the bottom. You’re pricing circuits, you’re pricing wavelengths, you’re pricing dark fiber, and it is brutally competitive.”

Although that is the part of the business that Ganzi said he did not want to say Crown underestimated or overestimated, he said that from Day One, Crown should have told the story this way: “We have this other business, and it is not like towers. Let us explain it to you. It is going to have 60 to 100 basis points of churn every month. But, here is the good news: We are growing it at 14 percent to 15 percent, so it is a nice little net 3 percent to 4 percent growth business.”

If Crown would have disclosed that, pushed it over to the left really fast, and kept its wholesale fiber business in one lane, reported small cells in the third lane, and towers in the fourth lane, Ganzi said, the company would not have had a problem. Now, he said, Crown has to unwind that story and tell the story differently. Ganzi said he understood Crown’s situation with telling it story the right way, because he observed that Zayo Group Holdings had the same problem. The reason Digital Colony was able to buy Zayo at the right price, he said, was that Zayo had a messaging problem.

“The reality is that Crown has a great management team and a great set of assets,” Ganzi said. “They are going to figure out how to tell the story. Trying to communicate with public investors what fiber is, is hard. My good friend Jennifer Fritzsche at Wells Fargo Securities used to say, ‘Fiber is just a tower turned on its side.’ It’s not that simple.”

Ganzi listed factors that differentiate the fiber business from the tower business: “Permitting. Strategic moat. Privacy of conduits. Curb cuts. Access to buildings. The Telecommunications Act of 1996 that leveled the playing field, giving equal access to all property owners. Non-discriminatory access curb cuts to the minimum/main point-of-entry (MPOE). Once that happened, building owners could not keep us out of their MPOE. An enterprise had to let everyone in to the MPOE. What an enterprise did inside its risers was up to the enterprise, but the enterprise had to provide open access for everyone. That has created kind of a free-for-all with the enterprise.”

Since Digital Colony bought Zayo Group Holdings, Ganzi said he has served on Zayo’s board of directors, and he spends three to four hours a week on matters involving Zayo. Every week, he said, he learns more about the fiber business, which he described as super-interesting. He said Digital Colony is going to do really well with Zayo, yet other companies may not do well with some of their fiber assets if they paid a multiple of 28 or 30 times for those assets, as he said he has observed some pay.

“The fiber business is hard,” Ganzi said. “You have to wake up, and you have to fight every day.”

Referring to how much of his company’s digital strategy revolves around 5G wireless communications, Ganzi spoke of the money spent on digital during 2020. “There will be about a $378 billion total available market (TAM) in digital spend,” he said, “and $211 billion of that will be fiber. Some of that has to be 5G, yes? But a lot of that just has to be bringing broadband out to homes, and a response to the COVID-19 pandemic. So, big overweight in fiber to the home, big overweight in fiber to the whatever — data center, tower, you name it — and then, fiber to the enterprise.”

In Ganzi’s view, fiber is not necessarily a 5G catalyst and, instead, fiber is the connective tissue that brings it all together. As for towers and small cells, he said they probably represent about an $80 billion TAM in 2020, in terms of what was spent, and probably another $70 billion to $80 billion in data center spend. With data center spend, Ganzi said, everything Digital Colony is doing is oriented to the cloud because most of the growth is based on cloud computing, rotation of public cloud, rotation of private cloud, enterprise workload-shifting and IoT workload-shifting.

He said Digital Colony also is doing quite a bit with artificial intelligence (AI), which is reflected in many AI workloads with Nvidia and with teaching universities such as Carnegie Mellon and Georgia Tech, where Digital Colony has data centers on their campuses. IBM defines AI workloads as applications based on machine learning and deep learning, using unstructured data and information as the fuel to drive these applications.

“That’s what we call big compute, because those types of compute loads are big power density generators.”

Under the product name of DGX Systems, Nvidia offers what it calls the world’s first portfolio of purpose-built supercomputers designed to give data scientists the most powerful tools for AI exploration that goes from the desk to the data center and to the cloud.

“You have to have a sophisticated facility to deal with those AI guys, particularly Nvidia,” Ganzi said. “Nvidia is a big customer of ours.”

Ganzi Receives Telecom, Media & Technology Leadership Award

By the Editors of AGL

Ganzi

Marc Ganzi, future CEO of Colony and the current CEO of Digital Colony, received the Telecom, Media and Technology Leadership Award and the TMT M&A Awards 2019 recently in London.

“I am humbled to have been selected by my peers for this recognition,” Ganzi said in a prepared release. “The award is testimony to my partners and team at Digital Colony who continue to execute our commitment and vision to serving our customers globally with mission critical digital infrastructure.”

Ganzi has a long career as a pioneer and leading entrepreneur in digital real estate and infrastructure, and 2019 has been a year of exceptional achievements. He led the closing of the first and largest discretionary investment fund dedicated to digital infrastructure – Digital Colony Partners, the partnership between Colony Capital and Digital Bridge – at more than $4 billion of committed capital. A major acquisition was announced in May 2019, with Ganzi spearheading the Digital Colony and EQT (pending) $14 billion acquisition of Zayo Group Holdings.

In 2019, Colony CEO and Founder Thomas J. Barrack, Jr. and Ganzi announced a strategic combination of their companies and the creation of a dynamic partnership. Colony Capital acquired Digital Bridge, with Ganzi slated to succeed Barrack as Colony CEO. Ganzi’s investments in digital infrastructure have consistently leveraged the real estate component critical to infrastructure investing, which aligns with Colony’s global scale, operating platform and capital markets access. The intersection of real estate and digital trends, and the historic, transformative global deployment of 5G network infrastructure are the themes that Ganzi and the new combined company are aggressively pursuing with expanded financial resources and investment talent.

Zayo Purchased by Ganzi’s Digital Colony, EQT

Acquisition is Latest in Global Buying Spree of Small Cell, DAS, Fiber Assets


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.