Tomorrow’s carrier-neutral operators to integrate tower, fiber and data center assets
A new breed of integrated owners of infrastructure network assets will emerge over the next 2-3 years, converging towers, data centers, and fiber networks
By Matt Walker

MTN Consulting segments the carrier-neutral network operator (CNNO) market into three parts based on asset focus: towers, data centers, and bandwidth (fiber). These dividing lines have always been imperfect as there is some ownership across asset category. Some of that crossover has come from M&A, as for example with tower specialist Crown Castle’s 2017 acquisition of Lightower and its vast fiber network. Some has come from incremental expansion of business models, as with Zayo building small cells on top of its fiber network, or Equinix’s investment in data center interconnect optical networks. Some has resulted from a telco spinning off multiple types of infrastructure at once, creating a new entity like the Uniti Group with holdings across fiber, towers, and data centers. Private equity investments across sector boundaries has also driven some of the integration, a trend which is accelerating now thanks to Digital Bridge, GI Partners, Macquarie and others.

Looking forward, MTN Consulting expects the CNNO market to be driven by entities with holdings across all three types of infrastructure. Publicly held and private equity-controlled CNNOs will seek to offer integrated “digital infrastructure” to communications network operators, with a focus on the telco and webscale markets as their primary customers. One of many reasons for this integration is the challenges faced by today’s CNNOs: high levels of debt, weak cash flows, declining tenancy ratios in the tower sector, and the emergence of a need for data center and fiber buildouts at the network’s edge. There will continue to be many niche CNNOs focused on one specific type of asset, or two (e.g. towers and fiber), but the economic logic for a more integrated offering is compelling. The new breed of CNNOs will compile some of their network by M&A, as they always have, but there will be significant new investment in network expansion, especially in the data center and fiber space.

There will be challenges faced by the integrated CNNO, to be sure. The skillsets, software, and supplier relationships involved in building and operating towers, data centers and fiber networks vary widely. However, customer needs will drive this integration, along with the realities of scale economics.

The main customers for CNNO resources are telecom and webscale network operators. Increasingly telcos are aiming for asset-light operating models to cope with limited new revenue opportunities; most are happy to rent physical assets rather than build and operate their own. Telcos also now rely on other providers, namely the webscalers, for some of their service innovation and deployment. For their part, webscalers have spent heavily on construction of new data centers in recent years, and have built their own fiber networks in some locations – but this is not their core competency. The need to grow quickly has kept many functions in-house for the webscalers, but the CNNO sector has an opportunity to entice webscalers to outsource more of these functions.

On the supply side, vendors, construction firms, and subcontractors will benefit from an integrated approach to working with tomorrow’s leading CNNOs, whether private or public. CNNO margins will remain tight so there will be a strong interest in growing to scale and exploiting synergies across multiple infrastructure types. For instance, vendors who can advise CNNOs on how to design the data center, and supply optical networking equipment, and help procure fiber in bulk, and source passive network gear for towers will find a receptive audience. Construction firms able to execute large projects across multiple regions will have a leg up on smaller regional firms. Speed to market and competitive pricing will be key on the supply side, as CNNOs’ customers will only outsource their tower, fiber and DC needs if they can procure what they want when they want it, at competitive prices.

Table Of Contents

  • Summary – page 2
  • Telcos continue to explore new, asset-light business models – 3
  • Webscalers need help filling gaps in their network and may need mobile – 4
  • Today’s carrier-neutral providers face a range of current challenges – 6
  • Private equity investments in CNNO sector will help transform it – 7
  • Largest player in each CNNO segment currently focused on growth within current market, but market diversifies after this – 11
  • Conclusion – 13
  • Appendix – page 15
    • About MTN Consulting 
    • Terms of Use 

Figure & Charts

Figure 1: YoY growth in telco revenues, fixed exchange rate basis

Figure 2: Equinix’s expanded ambitions for xScale (initial = 2018, new=2021)

Figure 3: Facebook’s recent terrestrial fiber deployments in the US

Figure 4: CNNOs: Net debt by segment, 2011-20

Figure 5: Digital Bridge’s business strategy evolution

Figure 6: Top CNNOs by 2020 revenues ($M)

Figure 7: Capex and M&A spending in CNNO segment by quarter, 1Q14-4Q20 ($M)

Table 1: Financial sector’s growing support for integrated CNNO business model

Coverage

Companies and organizations mentioned in this report include:

21Vianet
Adani Group
Airtel (Nxtra)
Airtel Africa
AirTrunk
Alphabet (Google)
Ampere
Andean Tower Partners
Apollo Towers
Ascenty
Astound Broadband
AT&T
ATM S.A.
Bain Capital
beanfield
Blackstone
Blue Stream Fiber
Brookfield
Carlyle
Cellnex
China Tower
ChinData
CIF Holding
Cincinnati Bell
CK Hutchison
CMC Networks
Cologix
Colony Capital (Digital Bridge)
COPT
CoreSite Realty
Crown Castle
CyrusOne
Dark Fiber & Infrastructure
DataBank
DC BLOX
DCI Data Centers
Deutsche Telekom
DigiPlex
Digital Edge
Digital Realty
DR Fortress
EdgeConnex
Enel Open Fiber
EQT
Equinix
euNetworks
Evoque
extenet systems
Facebook
GI Partners
Goldman Sachs
Hawaiian Telecom
Hivory
Hotwire
Hyperoptic
Infomart
Insite Wireless
IPI Partners
Itconic
Jio Platforms
KKR
KPN
Lightower
Lumos
Macquarie Group
Macquarie Telecom
Masmovil
Mexico Telecom Partners
Microsoft (Azure)
Netrality
NTT Communications
Open Dutch Fiber
Orange (TOTEM)
ORBCOMM
Pan Asia Majestic Eagle
Phoenix Towers
Pinnacle/Frontier
Prime Data Centers
Proximus
QTS
Quantum Loophole
Scala
Sify
SingTel Optus
Sipartech
Sixth Street Partners
SoftLayer Technologies
Stonepeak Infra
STP
SUPERNAP Italia
Surf Broadband
Tata Teleservices
TDF Infrastructure
Telefonica
Telx Group
Telxius
The Planet
T-Mobile Netherlands
TPG
Uniti Group
Vantage Data Centers
Verizon
Vertical Bridge
ViaWest
Vodafone (Vantage Towers)
Vodafone Idea
Vodafone NZ
Voneus
Wave Broadband
Waymo
Wireless Infra Group
Xplornet
Zayo

Visuals

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