Cox Communications today announced an agreement to acquire the commercial enterprise and carrier business of Segra, a U.S. fiber infrastructure provider, from the EQT Infrastructure III fund. In particular, it has been reported that Cox Communications is acquiring the Segra division at an enterprise value of more than $3.0bn.

As part of the transaction, EQT Infrastructure will retain ownership of Segra’s fiber-to-the-premise (FTTP) residential and small- to medium-sized business segment in Virginia and North Carolina.

Prior to the carve-out of Segra to Cox Communications, the business as-a-whole, owned 30.0k fiber route miles and 1 million fiber strand miles. Additionally, Segra’s fiber network had 10.4k on-net locations and connected 7.2k wireless towers. Finally, the company operates 9 data centers, providing retail colocation throughout the Mid-Atlantic and Southeast.

Segra Fiber Network Map

Segra – Commercial Services Business – Cox Communications

Cox Communications is only acquiring Segra’s commercial services segment, which serves commercial enterprise and wholesale carrier customers with fiber infrastructure. Specifically, the segment operates in nine states in the Mid-Atlantic and Southeast, namely Georgia, Kentucky, Maryland, North Carolina, Ohio, Pennsylvania, South Carolina, Virginia, and West Virginia.

Fiber Infrastructure

Segra’s commercial services segment provides broadband data services across a 26.0k route mile fiber network, offering both dark fiber and enterprise fiber services. Specifically, Segra’s dense metro (or intra-city) fiber network provides Ethernet, MPLS, dark fiber, data center connectivity, IP, managed services, voice, and cloud solutions.

Customers

Within its commercial services segment, Segra’s customers include carriers, enterprises, government agencies, higher education, and healthcare providers. Notably, backhaul for towers and small cells is a customer segment that has grown swiftly for Segra, as wireless networks have evolved for the purposes of 5G.

Importantly, this was showcased in November 2020, when DISH Network signed an agreement with Segra. Indeed, Segra is providing backhaul and fronthaul transport for DISH’s nationwide 5G network, at sites in the Mid-Atlantic and Southeast.

Management

Segra’s existing management team, including CEO Timothy Biltz, will continue to lead the Segra enterprise and carrier organization following Cox Communications’ acquisition. Additionally, the company will retain the Segra brand and operate as a standalone business within Cox Communications.

Segra – Residential and SMB Business – EQT Infrastructure

EQT Infrastructure is not selling Segra’s fiber-to-the-premise (FTTP) residential and small- to medium-sized business segment to Cox Communications. Instead, EQT will support this business as a standalone company. Specifically, the residential and SMB business operates under the Lumos Networks and NorthState brands in Virginia and North Carolina.

In terms of services, the company offers fiber internet, Wi-Fi, voice, and streaming services to residential and business customers.

Fiber Infrastructure

Lumos Networks and NorthState provide broadband availability to nearly 200k residential and SMB locations. Indeed, the majority of these locations are served with fiber infrastructure.

Strategy

EQT intends to accelerate the expansion of fiber broadband services to homes and businesses in underserved markets in Virginia, North Carolina, and adjacent locations throughout the region. Through additional investment, EQT aims to connect thousands of new homes and businesses with fiber.

Segra – History – Formation of the Company

Segra was formed by EQT Infrastructure through the combination of Lumos Networks, Spirit Communications, and NorthState Telecommunications, which were three geographically contiguous businesses.

Segra Corporate Timeline and Companies

Fiber – Precedent M&A Transactions

Below we highlight notable metrics from EQT Infrastructure’s purchases of Lumos Networks, Spirit Communications, and NorthState Telecommunications. Indeed, these companies helped form Segra’s Commercial Services business, which was ultimately sold to Cox Communications.

  1. February 2017: EQT Infrastructure announced the purchase of Lumos Networks for $950m, equivalent to 10.2x EBITDA
  2. August 2017: EQT Infrastructure announced the acquisition of Spirit Communications for 12.0x EBITDA
  3. December 2019: Segra, with the backing of EQT Infrastructure, bought NorthState Telecommunications for $240m, equivalent to 7.5x EBITDA

For further details on these and additional comparable transactions, check out our comprehensive list of fiber precedent M&A transactions here.

Transaction Advisors – Segra and EQT Infrastructure

Segra’s financial advisors were Bank Street and Goldman Sachs. Additionally, Segra’s legal advisor was Simpson Thacher & Bartlett.

Cox Communications – Overview

Cox Communications is the largest private telecom company in the United States, serving six million homes and businesses across 18 states. Through its commercial division, Cox Business, the company provides voice, data, and video services to more than 355k small and medium-sized businesses nationwide.

Overall, Cox Business’ customers include health care providers, K-12 & higher education, financial institutions, and federal, state, & local government organizations. Additionally, the division serves most of the largest wireless and wireline carriers in the U.S. through its wholesale business.

Fiber Infrastructure

Cox Communications is already an owner of significant broadband infrastructure. This includes 30.0k route miles of metro fiber and 200k+ miles of hybrid fiber-coaxial (HFC). Therefore, once combined with Segra’s Commercial Services business, Cox Communications will own 56.0k route miles of metro fiber.

Digital Infrastructure Investments

Beyond today’s acquisition of Segra from EQT, Cox Communications has also invested in a number of noteworthy digital infrastructure companies. Specifically, Cox Communications’ digital infrastructure investments have included EasyTel, EdgeConneX, InSite Wireless, StackPath, Unite Private Networks, and ViaWest.

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