Verizon pays $225m for WoW’s fiber in Chicago

Verizon has been building up its fiber reserves with a series of acquisitions and leasing deals, as it pushes forward with efforts to densify its network. Its latest transaction is the $225m cash purchase of much of the fiber in Chicago owned by WideOpenWest (WoW), which will get a further $50m to complete the network build.

Verizon said that the network, when completed in late 2018, will provide backhaul for 500 macrocell sites and 500 small cells. WoW said it will continue to focus on residential services through edge-out builds.

The deal will close early in the first quarter of 2018 and much of the proceeds will go to pay down part of WoW’s $2.74bn in debt. WoW will lose the opportunity to book around $13.2m to $13.7m in EBITDA in the current financial year.

WoW went public in March of 2017 raising some $400m and its revenue has been static at around $1.2bn annually for the past 3 years. It bills itself as the sixth largest cable operator in the US by number of customers, providing services to 3.1m homes and businesses in Alabama, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Ohio, South Carolina and Tennessee.

The company has been building out fiber in Chicago since 2014 and has constructed 1,200 miles, which it has always said was for a leading wireless carrier. It had revenues of $300m in its last published results (Q117), down less than 1% year-on-year,, while net income was considerably stronger than in recent quarters at $31.9m.

Verizon CFO Matt Ellis, speaking on the operator’s recent earnings call, was clear that fiber is a “critical element” in its plans. He said: “We remain focused on delivering increasing capacity over the long term utilizing a three-pronged approach: first, network features; second, densification; and third, spectrum. Fiber is a critical element in transforming both wireless and wireline networks to reduce costs and expand future capabilities.”

Earlier this year, the carrier signed a three-year, $1.05bn deal with Corning to purchase up to 12.4m miles of optical fiber per year in 2018 to 2020.