High On Fiber: 10 Notable Telecom Deals This Year4:00 PM EST Wed. Sep. 15, 2010
Call it an M&A epidemic: The telecom service provider space has been a hotbed of strategic acquisitions and eye-opening mergers in 2010, and with two of the most notable deals of the year happening just this week, it's safe to say that trend doesn't show signs of a slowdown. Here's a look back at 10 major deals in the telco space this year, from the creation of a fixed-wireless powerhouse, to fiber companies being snapped up left and right, to a $10.6 billion blockbuster that will be remembered as one of 2010's biggest deals in tech, period.
Easily the most eye-popping event of telecom service provider M&A activity this year, Qwest Communications in April said it had entered into an agreement to be acquired by CenturyLink for $10.6 billion. Expected to be completed in the first half of 2011, the deal, an all-stock transaction, would create a combined company with 173,000 miles of fiber network in the U.S. Under the terms, CenturyLink will hold 50.5 percent of the company, with the rest held by Qwest's shareholders.
In early September, MegaPath, Covad and Speakeasy said that their merger agreement had been completed, creating a new powerhouse managed services local exchange carrier (MSLEC) that will be known as MegaPath. Financial terms were not disclosed, but the combined company serves more than 85,000 businesses with a full portfolio covering IP voice, security, VPN and various Internet services.
Call it a fixed-wireless dynamo: the merger of Airband Communications with Sparkplug last month, creating a force now known as Airband. Airband is based in Dallas and has a presence in 17 U.S. markets with a combined suite of wireless voice and data services. CEO Michael Ruley knows it will take investment in the channel to continue to grow the business; he told CRN in a recent interview that he'd love to see Airband's indirect channel business grow from 20 percent to at least 50 percent overall.
Paetec earlier this week ponied up $460 million in cash to acquire Cavalier Telephone Corp., its regional rival. The deal significantly expands Paetec's fiber-optic network business, adding Cavalier's 17,000 miles of fiber network in the U.S. and upping Paetec's own fiber network holdings to more than 37,000 miles. Cavalier is expected to be a wholly owned subsidiary of Paetec, and the companies expect the deal to close within six months.
Windstream has been a hungry, hungry services provider, having earlier this year snapped up both NuVox and Iowa Telecom. Last month, it went for the hat trick with a $782 million pickup of Q-Comm, and its subsidiaries, Kentucky Data Link (KDL) and Nortlight -- the former a long-haul fiber specialist with presence in 22 states and the latter a more traditional CLEC with a big Midwest presence.
Back in June, Zayo Group continued what's become a pretty impressive streak of acquisitions, having made 15 of them since 2007. Its most recent capture was American Fiber Systems Holding (AFS), which brought to Zayo's rapidly expanding empire a presence in six major metro markets largely in the Western U.S. and 800 route miles of fiber.
One Communications has had a tough summer, thanks to a downgrade by Standard & Poor over reported concerns about One's ability to meet financial targets. In mid-July, One parted with its FiberNet business, selling it off to nTelos -- the winning bidder among several potential suitors -- for $170 million, and giving nTelos an added 3,500 miles of fiber, largely in West Virginia.
Private equity interests certainly aren't standing idly by while the service provider space attempts to sort itself out. In one of the bigger recent deals, Court Square Capital Partners (formerly Citigroup Venture Capital), plunked down $500 million to pry FiberTech Networks -- whose strength is building and operating fiber-optic networks in the Eastern and Central U.S. -- from another set of private equity backers, Nautic Partners and Ridgemont Equity Partners.
Lightower Fiber Networks just this week pulled the trigger on acquiring Lexent Metro Connect, giving Lightower some 150 route miles of dark fiber through New York and New Jersey to add to the 4,600 fiber route miles it has already, plus access to more than 200 commercial buildings. In a statement, Lightower President and CEO Rob Shanahan described it as a "natural fit."
It was back in May 2009 that Frontier Communications cut an $8.6 billion deal to acquire Verizon's 4.8 million residential and small-business leased landlines -- giving Frontier major Verizon wireline assets in 14 states. It wasn't until July, however, that the actual changeover between carriers took place, and the deal will continue to have plenty of ramifications. Verizon landline spin-offs haven't gone too smoothly in the past, but Frontier has a practiced partner in Adtran, which is delivering platform products and services to Frontier customers.