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Is Crown Castle (CCI) Mulling Over Acquiring Lightowers?

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As per Reuters, leading wireless tower operator and real-estate investment trust, Crown Castle International Corp. (CCI - Free Report) submitted a bid to take over Lightower Fiber Networks for more than $7 billion, including debt. However, neither side has confirmed the report. 

Crown Castle is U.S’s leading wireless communication tower operator. It has approximately 40,000 towers and 29,000 route miles of fiber network that support small cells. More than 90% of its quarterly revenues come from wireless service providers like Verizon Communications Inc. (VZ - Free Report) , AT&T Inc. (T - Free Report) and T-Mobile US Inc. (TMUS - Free Report) . It has acquired 9,700 wireless towers from AT&T and taken over another 7,200 from T-Mobile US.

Management has decided to double its existing small-cell network within the next two years.  According to a report by Guggenheim Equity Research, the company will spend around $1.2 billion to deploy 25,000 new small-cell nodes over the next 18--24 months. At present, small-cell networks are in high demand from wireless service providers to improve coverage and increase capacity.

Crown Castle’s ongoing efforts in transforming itself from a tower company to a fiber provider (focused on small cell opportunity) looks impressive. In the last few years, the company has purchased three fiber operators – FPL FiberNet Holdings, LLC (in Jan 2017), Quanta Fiber (called Sunesys, in Apr 2015) and 24/7 Mid-Atlantic Network (in Sep 2014).

Recently, Crown Castle acquired privately-held Wilcon Holdings LLC., a premier service provider of dark fiber, which will augment the wireless tower operator’s small-cell backhaul. Management is gradually developing small-cell networks to supplement macro site tower business. With the Wilcon acquisition, Crown Castle will attain ownership rights of over 28,000 route miles of fiber.

Acquisition of Lightower will increase Crown Castle’s fiber network and tower count by nearly 80% and 20%, respectively. Lightower runs over 33,000 route miles of fiber network across 17 states in the Northeast, Mid-Atlantic, and Midwest, and operates 7,000 towers and small cells.

In accordance with the current market scenario, Crown Castle is pursuing small cell deployments for its wireless customers. The company is making this move to enhance its networks and meet the whooping demand for high-speed, high-capacity wireless services.

Price Performance of Crown Castle

In the last three months, the stock price has gained 0.5%, in contrast with the Zacks categorized REIT-Equity Trust industry’s decline of 0.9%. Diversification of business structure toward fiber network will be a long-term positive for the company.

We believe these are primarily responsible for the stock currently holding a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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