Zayo eyes strong ROI as it inks new Tier 1 FTTT deal in Indiana
Zayo Group snapped up another fiber backhaul deal with a major U.S. wireless provider and the company expects a strong return its investment because it's using in-place fiber network facilities.
Zayo's latest fiber-to-the-tower (FTTT) deal will backhaul 78 new towers in Indiana and require the company to construct 234 new route miles of fiber. That number is reduced because of the 350 miles of existing fiber network that Zayo will leverage, bringing down the company's capital investment for the project to an incremental $14 million.
On top of the FTTT deal, Zayo also expects to use the new network it's building for serving other wireless tenants and providing fiber-based services to customers including universities, school districts, hospitals and content providers.
"Zayo has a successful history of leveraging assets and capital associated with signed customer contracts," Jacob Fuller, vice president of Zayo's Mobile Infrastructure segment, said in a statement.
Those comments and Zayo's plans for its new fiber backhaul contract in Indiana are a prime example of the company's previously stated goals of using existing network infrastructure for wireless backhaul and enterprise network deals as well as using new fiber network buildouts to offer other customers a mix of lit and dark fiber services.
"These build outs are not nearly as attractive when it's just four customers, whereas we have hundreds and hundreds of customers we can pile on these networks," Fuller said in a previous interview with FierceInstaller.
As of Zayo's first quarter of its fiscal 2016, dark fiber has been driving the most growth in its Physical Infrastructure segment, which increased by $29.7 million, or 19 percent, to $183.7 million from $154.0 million in the year-ago quarter. The company's Mobile Infrastructure segment—which provides direct fiber connections to cell towers, small cells, hub sites, and mobile switching centers—is also a growth contributor.
During last quarter's earnings call, Zayo CEO Dan Caruso said the last five years for his company were mostly about bandwidth contracts for towers that were either supported by FTTT or copper, but now his company is seeing more demand for dark fiber services to the tower, driven in particular by one of the U.S. carriers, whose name he did not specify.
Caruso also talked up the backhaul opportunities for small cells and Cloud-RAN (C-RAN), which he said will require dark fiber in between the towers and all small cells feeding back to the base station.
"So if you put all that together, that's a longwinded way of saying we're very early on in how fiber is going to be used as part of the mobile infrastructure architecture," Caruso said, according to a Seeking Alpha transcript. "We expect it to continue to contribute at a significant pace for pretty much for every quarter as far as I can see."
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