2025 preview: Make way for more fiber M&A

　　The fiber broadband market is likely headed for more consolidation in the coming year, according to research from consulting firm AlixPartners.

　　In a survey conducted in August 2024, AlixPartners found there are over 400 small fiber providers that are likely to merge or be acquired by larger providers and private equity firms. Some consolidation is expected for 2025, with more going into 2026 and 2027.

　　The survey was fielded amongst 60 fiber executives, as well as private equity firms and investors, with 93% saying consolidation is happening or upcoming, and 70% of those expecting activity to ramp up over the next year. Overall, there are roughly 1,900 "small-scale" fiber companies in the US, of which 1,000 are electric co-ops or part of an energy firm, says AlixPartners. Of the remaining 900, the firm estimates around 400 are "meaningful candidates for M&A."

　　As AlixPartners' Andrej Danis told Light Reading, those 400 will include fiber firms with existing private equity backing, fiber builders and utility companies looking to spin-out their fiber units. As an example, Danis, who serves as a partner and managing director at the consulting firm, pointed to DQE Communications in Pittsburgh. Formed in 1997 as a subsidiary of Duquesne Light Holdings, DQE was acquired by private investment firm GI Partners earlier this year.

　　As for the acquirers, Danis said he expects to see a combination of mid-tier providers buying up small companies, and for smaller fiber firms to form strategic conglomerates.

　　"When you have like, two, three companies which have an interesting, not overlapping footprint ... they can come together and create more of a conglomerate setup that maybe will be co-owned by multiple investors who already own certain portions," Danis said. "You go maybe from 50,000-70,000 homes passed to suddenly a few hundred thousands of homes passed and subscribers, and that suddenly starts to create a scale," in turn improving internal cash flow and operations, he added.

　　A third acquisition group will be Tier-1 providers buying up mid-sized firms and conglomerates.

　　Notably, AlixPartners found that more fiber firms are expecting to sell than buy. However, Danis argued that these companies will need a "mindset shift" to prioritize profitability over growth.

　　"In our one-on-one conversations with private equity stakeholders, profitability arose as the main concern," said Danis.

　　Ongoing activity

　　The past year saw an array of M&A activity in the fiber space already, including Verizon's $20 billion Frontier bid, and T-Mobile forming joint ventures with Lumos and Metronet.

　　Other recent plays include SDC Capital's IQ Fiber, based in Jacksonville, Florida, announcing it will acquire ThinkBig Networks, a Maryland-based fiber provider, following regulatory approvals; Canada's BCE striking a deal to acquire Ziply Fiber; and Rise Broadband scooping up midAtlantic Broadband's fiber business in Missouri.