Verizon Frontier's offer confirms that the race for fiber consolidation in the US is on

T-Mobile may have kicked off the inaugural round of high-end fiber consolidation in the U.S. with its two joint venture announcements (JVs) months earlier, but Verizon's September 2024 announcement regarding its proposed acquisition of Frontier Communications marks an important one Escalation There will likely be several waves of clashes.

There is a veritable legion of first-move fiber overbuilders in the U.S., which is why market watchers largely view consolidation as a matter of “when” rather than “if.” Such consolidation would eventually allow the telecom giants to expand their fiber optic networks, while also providing the private money investors who back these smaller developers with a nice return on fiber rollout, which can often prove lengthy, expensive, and subject to local approvals Bottlenecks lead to office.

The long-term competitive advantage of being the only fiber optic operator in town is significant. In fact, it is this advantage – and the ability to secure a churn-resistant subscriber base with future-proof access technology – that makes the fiber build engines work in the first place. And it's the fear of missing out on that advantage – or worse, seeing it go to a competitor – that will ensure more joint ventures and acquisitions are on the way.

Verizon is still behind AT&T – but for how much longer?

Before Verizon announced its decision to spend $20 billion to acquire Frontier Communications, it had long seemed content to solidify its fiber base in the Northeast and Mid-Atlantic U.S. with another roughly 400,000 passes per year. However, the Frontier deal calls for Verizon to add fiber infrastructure in 25 states, including large parts of the Southwest and Midwest.

However, while the acquisition of Frontier (currently the largest fiber-only Internet provider in the US) will go a long way toward closing the gap, Verizon will still lag behind AT&T's fiber rollout in the US due to the expensive merger.

AT&T wants to remain the Clubhouse leader once Verizon's ink dries

AT&T reported a total of 27.8 million fiber passes at the end of the second quarter, while the combination of Frontier and Verizon would be around 25 million.

In addition, just a few days after Verizon's Frontier announcement, AT&T made it clear that the company wanted to charge its own fee here. In addition to emphasizing its intention to expand Gigapower's open access fiber JV with BlackRock beyond the initial target of 1.5 million passes, AT&T also announced partnerships with a number of open access fiber manufacturers.

Although AT&T has not revised its official goal of 30 million total fiber lines by the end of 2025, the company noted that the combination of its own expansion efforts, the Gigapower JV and its open access partnerships could lead the operator to reach 40 million By the time it's all over, there will be a total of 45 million passers-by.

The story continues

T-Mobile isn't done yet (despite cautious protests to the contrary)

After T-Mobile initiated the current land grab in the fiber optic sector with its JV deals for Lumos (April 2024, approx. US$1 billion) and Metronet (July 2024, approx. US$4.9 billion). T-Mobile once again shone a bright light on its broadband efforts in its latest Capital Markets Day event, claiming that it plans to have fiber optic cable coverage to 12 to 15 million homes by 2030.

Although T-Mobile claims it doesn't currently have another fiber deal in the works, further fiber moves from the Un-carrier are certainly likely. There were subtle hints of this throughout the presentation, particularly during CEO Mike Sievert's 2027 financial guidance.

In outlining the significant amount of capital expected to be available following the dividend payout, share buybacks and completion of current deals, the CEO happily pointed out that the company still had $20 billion available for potential investments; The fact that the existing capital would match the total amount Verizon just offered for Frontier was lost on few.

And now comes the advertising and creating sparks…

The race for fiber consolidation is underway — or at least the first wave is on before the U.S. government's $42.45 billion in broadband infrastructure funding begins to flow.

Once the associated years-long construction process gets underway, there will likely be some slowdown in connection work as everyone has their shovels in the dirt. It's also important to note that there are multiple levels of consolidation before getting to the top providers, starting with the fleet of smaller providers that need to be consolidated into larger regional operations before being absorbed in turn by even larger operators.

Meanwhile, players like Lumen and Ziply Fiber with significant scale and installed fiber bases are polishing up their fiber assets and balance sheets to prepare for whatever suitors haven't called yet.

“Verizon Frontier's Offer Confirms the Race for Fiber Consolidation in the U.S. is On” was originally created and published by Verdict, a brand owned by GlobalData.

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