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Small cells

CS&L Buys Tower Cloud for $230M in Small Cells, 5G Play

Infrastructure player Communications Sales & Leasing (CS&L) has agreed to buy smaller rival Tower Cloud for $230 million in anticipation of growing demand for small cell and dark fiber services and the arrival of 5G technology.

CS&L already owns about 3.9 million "fiber strand miles," 85 wireless towers and various other network assets in the US and Mexico, but the Tower Cloud deal will add another 90,000 fiber strand miles "in service" in the southeastern US.

CS&L also notes that Tower Cloud is planning to add another 181,000 miles to its network in future thanks to business with major wireless carriers.

"Tower Cloud significantly expands our backhaul network and greatly accelerates our entry into the high-growth small cell and dark fiber businesses," said Kenny Gunderman, president and CEO of CS&L, in a statement. "We… are seeing an increasing number of opportunities arise as carriers densify their networks and look forward to the deployment of 5G and related technologies."

Tower Cloud holds a number of key attractions for CS&L. More than 90% of its revenues come from US wireless carriers, which CS&L sees as a critical market. The company is also building dark fiber routes in Florida and Georgia that have so far generated "contractual" revenues of $175 million, although CS&L did not say over what period the company will book these sales.

Interest in dark fiber and small cell technologies is growing as wireless carriers roll out higher-speed network services and plan for the introduction of 5G technology, which is expected to open up new data opportunities in consumer and enterprise markets.

Dark fiber is being used to carry growing amounts of mobile data traffic, while small cells are needed to provide high-capacity services in hotspots. (See Small Cell Forum Sets Out 5G Stall.)

Operators including Verizon Communications Inc. (NYSE: VZ) and Sprint Corp. (NYSE: S) have already announced plans to "densify" their networks -- through the use of small cell and other technologies -- to cope with rising volumes of data traffic. (See Verizon Trumpets Network Densification Plans and Sprint CEO: Our Spectrum Is for 5G.)


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CS&L reckons it can achieve annual cost "synergies" of $6 million within three years of closing the deal by combining its own operations with those of Tower Cloud.

It plans to fund the takeover using $180 million in cash plus 1.9 million shares in CS&L common stock. Tower Cloud shareholders will have the opportunity to receive "additional consideration" should the combined company meet certain targets, which have not been disclosed.

The cash portion of the deal will be funded through a mixture of cash on hand and borrowings under an existing credit facility.

The deal, which is expected to close later this year, was announced just a few months after CS&L said it would acquire fiber network player PEG Bandwidth LLC for $409 million.

That particular transaction gave CS&L about 300,000 fiber strand miles in parts of the US including Illinois, the northeast and south-central regions.

CS&L was set up by communications service provider Windstream Communications Inc. (Nasdaq: WIN) in 2014 as a means of reducing debts. (See Windstream Gets State Nods on REIT Spin-off.)

Shares in the business were trading up by 1.7% on the Nasdaq at the time of publication and have risen by about 50% this year.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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