In one of the more interesting fiber transactions of recent years, T-Mobile announced the acquisition of Metronet, a fiber overbuilder. Metronet is currently owned by Oak Hill Capital, the Cinelli family who founded the company, and KKR, a minority investor. Metronet has been one of the fastest growing fiber overbuilders and has grown to a reported 2 million fiber passings. Metronet has been an aggressive overbuilder and also picked up customers in the 2022 merger with Vexus, an overbuilder from Texas.
T-Mobile will use a mix of debt and equity to invest $4.9 billion to acquire a 50% stake in the business. Subject to regulatory approval of the deal, T-Mobile will take over the customers and the operations of the business. Metronet will focus on expansion plans, network engineering, network deployment, and customer installations.
This acquisition follows T-Mobile’s acquisition of Lumos announced in April. That acquisition brought 320,000 customers and 7,500 route miles of fiber to T-Mobile in the mid-Atlantic area.
T-Mobile expects the acquired companies to be self-supporting, including funding the expansion of fiber. Metronet has announced plans to grow to 6.5 million fiber passings by 2030.
This is an interesting transaction because it represents a major foray into the wireline business by a traditional wireless company. T-Mobile has already been the fastest growing ISP over the last few years as it added almost 5.2 million customers to its FWA cellular wireless product over a few year span. The two fiber overbuilders plus the FWA business will make T-Mobile the fifth largest ISP in the country behind Comcast, Charter, AT&T, and Verizon.
Metronet advertises itself as an affordable alternative to cable company broadband. It’s prices, disregarding introductory specials, offer 100 Mbps for $40 or a gigabit for $60. But Metronet has one of the more unusual hidden fees in the industry, and every broadband product requires a mandatory $13 month additional fee it calls Tech Assurance, which is essentially insurance and “covers any service calls or repairs to all Metronet-owned equipment”.
I’ve written several blogs lately that have speculated that the broadband business is reaching full market penetration, in that households that can afford broadband mostly seem to now have it. That doesn’t mean the industry can’t grow, and companies like Metronet and now T-Mobile believe there is a lot of room to capture customers from the big cable companies. As much as you might hear about how fiber has captured the market, Comcast and Charter still have over half of all broadband customers in the country.
Another interesting dynamic is T-Mobile will offer both fiber and FWA wireless broadband in its acquired markets, meaning it has two alternatives for customers. It might seem like the company is competing against itself, but it’s instead offering two alternatives to win customers from cable companies and other ISPs.
This acquisition also raises the interesting question of whether T-Mobile is done with expansion. A recent op-ed in FierceNetworks speculated that there are some other interesting acquisition targets in the market, including Quantum Fiber (CenturyLink fiber), Ziply, Zayo, and Astound. I haven’t the slightest idea if any of these companies are in play, but any time there is a major acquisition, the speculation game of musical chairs always begins.