The Magenta provider, which can no longer be called a pure play mobile service provider, just purchased its second fiber provider: Metronet.
The privately-held fiber provider had been on the market for some time. T-Mobile is teaming up with another private equity provider, KKR, to form a 50/50 joint venture and is injecting around $4.9 billion dollars into it. It will be purchasing Metronet’s residential fiber organization with 2 million customers in 17 states.
The existing shareholders, Oak Hill Capital and Metronet founder John Cinelli, will keep a minority stake. In our Pulse Survey, Metronet gets a very high cNPS for complete experience.
This move follows another 50/50 joint venture wherein the combined entity purchased Lumos with operations in Virgina and North Carolina. At the time, T-Mobile said that it would invest another $3.5 billion to reach 3.5 million homes by 2028. This time, T-Mobile said that it would not invest more money into the new venture. Metronet, or its likely T-Mobile branded venture, is expected to reach 6.5 million homes by 2030.
The new combined T-Mobile fiber empire will look like this:
Why is T-Mobile investing so heavily into fiber? Convergence! What has been a punchline for two decades is actually finally happening.
John Stankey demonstrated on AT&T’s Q2 2024 earning call that customers like convergence and that those who purchase mobile and fiber together have superior customer metrics. AT&T is the furthest ahead when it comes to fiber/mobile convergence, and T-Mobile has certainly noticed another area where it can profitably expand its business.
In addition, fiber is the ideal gateway product for fixed wireless customers, and it is the safety valve for capacity overload. Since Congress does not seem to want to allocate more spectrum for broadband competition, mobile operators are expanding into fixed. In addition, fixed wireless adoption in a zip code is the proof positive business case to overbuild it with fiber and then upsell happy fixed wireless customers to a superior product.
In March, when the first rumors of T-Mobile purchasing a fiber provider surfaced, we asked questions in our survey about its appeal and why people would or would not choose T-Mobile Fiber. We also conducted a price sensitivity analysis, running a module over the weekend. Our clients had an in-depth-analysis on their desks the following Tuesday, a full month ahead of the announcement.
More than half of the 7,275 respondents are interested in the T-Mobile Fiber offer. The most common reason for being interested in T-Mobile Fiber is the fiber characteristics of speed and reliability, followed by T-Mobile’s brand reputation. T-Mobile Fiber will do well, and the convergence play outlined by AT&T will also serve T-Mobile well.
Looking ahead
What’s next for T-Mobile? Looking at the map of the new T-Mobile Fiber empire, it becomes obvious that the answer lies west of the Mississippi.
Here are some potential candidates:
Quantum Fiber
Quantum Fiber would be a home game for T-Mobile, as it is one of the major fiber operators in and around Seattle and Bellevue, Washington. Quantum also has very high cNPS for complete experience in our Pulse surveys. Its coverage also extends Metronet’s Minnesota and Iowa footprint and brings it to growth markets like Phoenix, Arizona; Salt Lake City, Utah; and Denver. With Denver being Charter’s tech HQ, it would allow T-Mobile to stick it to one of their competitors in their home market, something that T-Mobile seems to relish. (Remember that T-Mobile announced the Metronet deal during the AT&T earnings call.)
Ziply
Ziply is a fiber provider in the Pacific Northwest, with very good cNPS for total experience. The former Frontier Northwest operation is owned by WaveDivision Capital. If T-Mobile wants to have something nearby, smaller than Quantum, with coverage around Bellevue and Redmond/Kirkland to the north (home of Microsoft and birthplace of Costco), then Ziply might be a good option.
Zayo
Zayo, the EQT-owned business fiber provider, would be a very interesting play. T-Mobile already established a joint venture with EQT when they jointly purchased Lumos. Zayo has metro networks in many of the right places, but extending Zayo’s fiber to homes will be a significant lift. It would be an ambitious play that would make T-Mobile for Business a serious player in the medium business and large enterprise market.
Astound
Astound would give T-Mobile an even bigger bingo card: Seattle area coverage for the Bellevue team, Dallas-area coverage for taunting rival AT&T and a large coverage area in Chicago, Illinois. Then Astound has coverage in the Los Angeles area, which is Charter’s biggest market, and San Francisco for California coverage. On top of it, Astound has a splattering of fiber in New York City (if you can make it here, you can make it anywhere) and Boston. On the downside, Astound is not a fiber pure play, but rather a significant cable overbuilder, with cNPS total satisfaction scores on the high-end of cable, substantially below a pureplay fiber provider. Does T-Mobile really want to take on the heavy lift to migrate cable customers to fiber, while taking the almost inevitable cable service quality reputation hit?
It's going to be interesting to see how T-Mobile will cobble together its fiber empire. It now has two acquisitions with two private equity companies, making this an exciting development to watch.
Roger Entner is founder and analyst at Recon Analytics. He received an Honorary Doctor of Science from Heriot-Watt University. Recon Analytics specializes in fact-based research and the analysis of disparate data sources to provide insights into the world of telecommunications. Follow Roger @rogerentner.
Industry Voices are op-eds from industry experts or analysts invited to contribute by Fierce staff. They do not represent the opinions of Fierce.