Bucking the industry trend to diversify, Crown Castle has sold its fiber and small cells solutions businesses to a combination of companies, EQT active core infrastructure funds and ZAYO Group Holdings for $8.5 billion. In particular, EQT acquired the small cell business, and ZAYO agreed to acquire the commercial enterprise fiber segment, which will allow Crown Castle to become a pure play tower company.
“We believe the sale of these businesses to EQT and ZAYO will maximize the long term value to Crown Castle’s shareholders from the combination of the proceeds from this transaction and increase Crown Castle’s ability to enhance the value of our tower business by creating a focused and premium pure play U.S. tower company,” Steven Moskowitz, Crown Castle CEO said.
The transaction, which will close in the first half of 2026, is the culmination of a turbulent time for Crown Castle and its board, which included a leadership change and a year-long strategic review of its fiber business. Moskowitz said although the company’s 90,000 route miles of fiber in the largest U.S. markets are “great assets,” fiber’s business model and customer base are different from towers, requiring different operational capabilities.
“Because the similarities between towers and fiber solutions are somewhat limited, we determined they should be separated to enhance focus on the system’s structure and the capabilities needed to maximize the value of towers,” he said.
Crown Castle’s sale of its fiber business is due in large part to pressure from activist investor Elliott Management, which called for a series of initiatives to improve Crown Castle’s performance in 2020. The group criticized the company’s return on investment (ROI) in fiber and said its Board of Directors did not have the needed expertise in fiber.
“While we admire Crown Castle’s investments in the wireless tower industry, we believe that the company’s expansion away from its core and into fiber infrastructure has detracted from shareholder returns and will continue to detract from shareholder returns unless significant changes are made,” Elliott Management said in a letter. “It is our considered view that Crown Castle’s fiber strategy has not been successful and that the return on these investments has significantly underperformed.”
Late in 2023, Jay Brown retired as president and CEO of Crown Castle, and a fiber review committee was formed. In April of last year, Moskowitz took the reins. Although fiber was the original focus of the review, the small cell business also became under scrutiny.
“While towers and small cells share similar market dynamics, we ultimately decided that the operating capabilities needed to run a tower business and a small cell business were dissimilar enough that the synergies between the two businesses were more than offset by the enhanced value we believe we will unlock in the tower business by creating a focused and premium pure play U.S. tower company,” Moskowitz said.
Crown Castles plans to plow the cash proceeds from the sale of its fiber into its tower business by repaying debt, strengthening the balance sheet and returning capital to shareholders through dividends and share repurchases.
“As part of the strategic and operating review, we announced a realignment of our operational strategy to focus on free cash flow generation as opposed to top line revenue growth,” Moskowitz said. “We increased the hurdle rates of our project pipeline, increased the efficiency of our capital spending, and updated our 2024 forward forecast.”
Crown Castle will increase capital spending in 2025, and a majority of that anticipated increase is going toward investing and controlling the parcels of land under its towers, according to Moskowitz. More money will be invested to streamline project management capabilities, including digitizing towers. The company has scanned half of its structures with drones so far.
“We believe these initiatives will make it more efficient for our customers to add equipment or collocate on our sites, accelerate the customer application cycle time, and increase the rate by which customers can complete their installations,” Moskowitz said. “We’re going to be absolutely laser focused on delivering great customer service for the wireless carriers as we drive operational excellence into the business, refining processes, leveraging technology better and enhancing automation, all in the effort to improve speed and ease of service.”
Wall Street liked the news of the sale, as Crown Castle’s stock price increased 9 percent, to $102.17 the day after the deal, regaining all but 3 percent of its losses over the past year, according to MarketWatch.
