Zayo Targets Enhanced AI Expansion with $4.25 Billion Crown Castle Acquisition
Zayo Acquires Crown Castle’s Fiber Assets
Zayo Group Holdings is set to strengthen its long-haul fiber network significantly through the acquisition of Crown Castle’s fiber assets for $4.25 billion. This transaction will add around 90,000 route miles to Zayo’s existing infrastructure, enhancing connectivity in key metropolitan areas such as New York, Los Angeles, and Miami. These cities are critical for high-speed, low-latency fiber routes, according to Marc Ganzi, CEO of DigitalBridge, which part-owns Zayo.
Enhancing Network Capabilities
This strategic acquisition focuses on connecting data centers across the United States, giving enterprises enhanced access to the networks vital for cloud computing and artificial intelligence (AI). Zayo has been anticipating a surge in demand for AI-based services and has positioned itself to meet this growing need. Bill Long, Zayo’s product chief, mentioned in February that the company was preparing for increased demand in AI services.
The acquisition comes after media reports indicated that Zayo was in the running for Crown Castle’s assets, outbidding private equity firm TPG. Leonard Lee from neXtCurve noted this acquisition aligns with Zayo’s strategy to diversify its portfolio in light of what he calls a “shift in AI gravity,” signifying a transition in AI demand from large model training to larger inference opportunities as more consumers and businesses utilize AI services.
AI-Focused Growth Opportunities
Zayo has made considerable strides in generating revenue from AI-related projects, securing more than $1 billion in contracts in 2024 alone. Furthermore, the company has an additional $3 billion in potential AI contracts on the horizon. Meanwhile, competitors like Lumen have similarly focused on AI and data center connectivity, closing deals worth over $8 billion in hyperscale networking.
Although initial reports suggested Zayo may be interested in Crown Castle’s small cell business, this area will instead be independently acquired by EQT, Zayo’s parent company. However, Zayo will support these small cells by providing fiber connectivity through a long-term commercial partnership.
The total value of both Crown Castle’s fiber and small cell assets is about $8.5 billion, with the Zayo transaction expected to be finalized by the first half of 2026.
The Challenges of Crown Castle’s Fiber Business
Crown Castle operates over 40,000 cell towers in the U.S., predominantly serving major wireless carriers. However, its fiber business has been struggling financially for several years. In late 2023, Elliott Management, an investment firm, pushed for a strategic evaluation of Crown Castle’s fiber assets, alleging that its current approach was detrimental to the company’s value.
The situation worsened when Crown Castle’s long-serving CEO, Jay Brown, stepped down shortly after Elliott initiated the strategic review. This exit sparked a series of leadership changes within the company that have added to its challenges.
Amid these transitions, Ganzi expressed his best wishes to Crown Castle as it shifts its focus entirely to a tower-centric business model, aiming to create value for its shareholders.
