Analysis: Inside Zayo's Crown Castle deal: what it means for towerco business models

The news that EQT-backed Zayo Group is leading the acquisition of Crown Castle’s fibre and small cell assets for over $8 billion is a major development with significant implications for the telecommunications tower companies industry. This analysis explores how this move impacts towercos and their business models.

Crown Castle has signed an agreement to sell its entire fibre segment, including supporting assets and personnel, for $8.5 billion. The transaction sees EQT acquiring the small cells business, while Zayo takes over the fibre solutions unit. The deal is expected to close in the first half of 2026, subject to regulatory approval. Proceeds will be used to repay debt and fund a $3 billion share repurchase program. This move repositions Crown Castle as a pure-play U.S. tower company, focused on driving growth in its core tower operations.

Crown Castle, one of the major players in the towerco sector, is known for owning and operating more than 40,000 cellular towers across the United States, leasing them to wireless carriers like Verizon and AT&T. Its decision to sell its fibre and small cell assets reflects a broader trend in the industry, where tower companies are rethinking their strategies, particularly given the high capital costs associated with fibre infrastructure development.

Traditionally, towercos have focused on leasing vertical infrastructure (cell towers) to wireless carriers. However, in recent years, many tower companies, including Crown Castle, have diversified into fibre investments to capitalise on the rising demand for mobile data, small cells, and 5G deployment. Crown Castle's decision to offload its fibre business highlights the challenges of managing these additional infrastructures, particularly the heavy financial burden of building and maintaining fibre networks.

The sale of these assets suggests a strategic pivot for Crown Castle, likely driven by the high costs and financial strain of building a fibre network. By retreating from this business, Crown Castle may be aiming to refocus on its core strength—tower leasing—and reduce expenditures on costly fibre infrastructure projects that are not delivering the same level of return as its tower operations.

This move could lead other towercos to reassess their fibre-related investments, questioning whether the ownership of fibre assets is the best use of capital. Tower companies like American Tower and SBA Communications might instead focus more intently on optimising and expanding their core tower businesses, which have a more predictable return on investment. Crown Castle’s exit from the fibre space suggests that partnerships or collaborations with dedicated fibre providers might be a more viable route for towercos to integrate fibre capabilities into their offerings without taking on the full financial burden of fibre ownership.

Along with the sale of the Fiber segment, Crown Castle is also announcing changes to its capital allocation framework. The Company currently expects to reduce its annualized dividend to approximately $4.25 per share starting in the second quarter of 2025.

For Zayo, the acquisition is a strategic win, adding around 90,000 miles of fibre to its existing network, significantly enhancing its position in the fibre market. As demand for high-capacity fibre networks grows—driven by AI workloads, hyperscale cloud computing, and 5G—Zayo is well-positioned to capitalise on these trends. This development could create new competitive pressures for towercos, as companies like Zayo, with their expanded fibre networks, can offer more comprehensive services to large enterprise clients, including both fibre and small cell infrastructure.

Towercos, with their focus on vertical infrastructure, may face challenges in competing with fibre specialists like Zayo, who can now provide a broader range of connectivity solutions across the U.S. The key for towercos will be maintaining strong partnerships with fibre providers to ensure they can continue to meet the growing demand for high-speed, reliable network services.

While the Zayo-Crown Castle deal increases competition, the fibre and tower businesses are not mutually exclusive; they complement each other. For towercos, fibre remains crucial for supporting 5G networks and future AI-driven infrastructure, making collaboration with fibre providers a vital part of their strategy. The challenge for towercos will be to find the right balance between owning fibre assets and partnering with companies like Zayo to deliver the necessary services to carriers and enterprises.

Crown Castle’s decision to exit the fibre business could prompt new opportunities for tower companies to form strategic partnerships with fibre providers, allowing each to focus on their respective strengths—towers for vertical connectivity and fibre for high-speed horizontal data transmission. Towercos can benefit from these synergies by offering faster and more reliable 5G services without shouldering the high costs of building and maintaining fibre networks.

As this deal is expected to close by 2026, the long-term effects on the towerco industry remain to be seen. However, the immediate implication is clear: companies like Zayo, with strong backing from EQT and DigitalBridge, are aggressively positioning themselves as leaders in digital infrastructure, while towercos like Crown Castle are refocusing on their core businesses.

This transaction highlights the need for tower companies to rethink their strategies regarding fibre ownership. While fibre is essential to supporting next-generation telecoms networks, direct ownership of fibre may not be the most effective strategy for all towercos. Moving forward, the industry may see towercos doubling down on their traditional infrastructure, while looking to collaborate with fibre providers to offer the connectivity solutions demanded by emerging technologies like AI and 5G.

In an evolving digital landscape, tower companies must adapt their business models to remain competitive while supporting the growth of AI, 5G, and other data-intensive technologies.