US towerco Crown Castle has agreed to acquire Quanta Fiber Networks (Sunesys) for about US$1bn in cash from power company Quanta Services. The deal marks the tower giant’s second fibre purchase in about eight months.
Quanta Services president and…
US towerco Crown Castle has agreed to acquire Quanta Fiber Networks (Sunesys) for about US$1bn in cash from power company Quanta Services. The deal marks the tower giant’s second fibre purchase in about eight months.
Quanta Services president and CEO Jim O’Neill said in a statement that the purchase price represents a 15x trailing EBITDA multiple, while Wells Fargo senior analyst Jennifer Fritzsche estimated it at 15.4-16.6x.
“This is ahead of recent multiples we have seen in the 11x-14x range for other fibre deals,” Fritzsche said, noting that Crown, however, expects the deal to be immediately accretive to adjusted funds from operations per share.
In its own statement, Texas-based Crown said it expects the acquisition to strengthen its position in small cell networks, more than doubling its fibre footprint for deployments and expanding its presence in major metropolitan markets.
Sunesys owns or has rights to nearly 10,000 miles of fibre in markets including Los Angeles, Philadelphia, Chicago, Atlanta, Silicon Valley and northern New Jersey, Crown said.
Crown currently owns or has rights to about 7,000 miles of fibre supporting about 14,000 small cell nodes, which contribute 7% to its site rental revenues and site rental gross margin. It also has about 40,000 towers nationwide and about 1,800 in Australia via subsidiary CCAL.
Crown president and CEO Ben Moreland said the company believes that the “unique location” of Sunesys’ fibre assets will help it to boost its small cell deployments.
“Small cells are playing an increasingly critical role as wireless carriers pursue fibre-fed deployments to add capacity and density to their networks to accommodate the significant growth in mobile data.
“The Sunesys fibre assets are both complimentary to our existing footprint and located where we expect to see significant investment by wireless carriers.”
Crown’s first foray into fibre came last September, when it bought Baltimore-based 24/7 Mid-Atlantic Network for an undisclosed sum, gaining access to about 800 miles of fibre cable.
Small cell enthusiasm
Fritzsche said the deals reflect Crown’s “small cell enthusiasm”, noting that the towerco has indicated that the Sunesys deal will give it line of sight into more than 3,500 small cell opportunities.
Despite the fairly high multiple paid, she said she appreciates the logic of the deal as Crown should be able to increase the overall margin of each small cell project by owning more of the infrastructure.
“Crown is carving out a unique profile for itself in the small cell space in our view.”
While small cell is something of a hot topic right now – Fritzsche noted that it dominated this year’s PCIA Wireless Infrastructure Show – carriers still seem to be working out how best to approach it.
Crown expects the deal, which is subject to regulatory approvals, to close by the end of year. The company predicts the transaction will contribute US$80-85m to its gross margin, with about US$20m of general and administrative expenses in the first year of ownership.
JP Morgan advised Quanta on the deal, while Crown did not name an advisor.
Note offering to follow
Separately, Crown recently announced that it is planning a senior secured note offering tied to tower revenues to refinance existing debt. The yet-to-be-determined amount of notes will be offered as additional debt securities under an existing indenture.
