Crown Castle pays big for small cells

Contact: Mark Fontecchio

Crown Castle International shells out $7.1bn for fellow cell tower company Lightower Fiber Networks in the latest and largest of a flurry of acquisitions by the buyer to expand its small-cell coverage in the US. The purchases, made at above-market multiples, come as Crown Castle builds out infrastructure to support mobile operators dealing with surging data traffic.

With Lightower, Crown Castle obtains a larger network of cell towers, small-cell nodes and fiber deployments concentrated in the Northeast. Crown Castle has now spent $10.7bn on M&A in three years to build its small-cell network in the Northeast, southern California, Florida and Texas through acquisitions such as FiberNet ($1.5bn) and Sunesys ($1bn).

In the process, Crown Castle has spent more on M&A since 2014 than it had in the entire preceding decade and paid rich multiples along the way. According to 451 Research’s M&A KnowledgeBase, purchases of tower and fiber targets since 2014 carried a median valuation of 3x trailing revenue. Today’s pickup of Lightower values the target at about 9x, in the same neighborhood as Crown Castle’s other small-cell deals.

Why the premium? As we discussed in a December report, mobile networks face escalating demand as consumers increase video consumption and enterprises deploy mobile cloud apps. To keep up with that data demand, operators are increasingly turning to small-cell deployments.

Morgan Stanley advised Crown Castle on the transaction, while Citigroup Global Markets and Evercore Partners banked the seller.

Posted in M&A