Merger Mania

The industry is suddenly awash with talks of acquisitions and mergers. In September, Verizon announced the acquisition of Frontier Communications in an all-cash deal valued at $20 billion. T-Mobile has announced two acquisitions of fiber overbuilders. The first was the acquisition of Lumos, which has been building fiber in North Carolina, South Carolina, and Virginia. T-Mobile also announced the purchase of Metronet, a fiber overbuilder from the Midwest that has expanded into 17 states. T-Mobile is also buying Uscellular from TDS for $4.4 billion. Many fiber businesses clearly have the goal of growing large enough to flip to somebody larger. The investors in these businesses are largely venture capitalists who hope to sell companies at a premium multiple of what they paid to build the business. For example, the Lumos deal is reported to be valued at over $9,000 per existing broadband customer—a lot more than what the company spent to build the existing networks.