EarthLink Acquires VAR500 Solution Provider

EarthLink Friday said it will pay about $516 million to buy ITC Deltacom, an all-cash agreement that will give EarthLink an integrated communications services arm serving customers in the Southeastern U.S.

ITC Deltacom (2010 VAR500 No. 120), based in Huntsville, Ala., boasts a 16,400-mile fiber-optic infrastructure, including a 14-state Synchronous Optical Network backbone comprising 35 metro fiber rings, 294 co-locations and 20 voice and data switches. According to a statement, ITC Deltacom serves about 32,000 customers, including small and midsize businesses, enterprises, government agencies and wholesale customers with MPLS and IP products.

"The capabilities we acquire with this acquisition will be complemented by our existing New Edge Networks business as we combine our nationwide MPLS network capabilities with Deltacom's state-of-the-art infrastructure," said Rolla P. Huff, chairman and CEO of EarthLink, in a statement. "The combined company will be especially well-positioned to serve Fortune 1000 companies across the country, one-quarter of which are headquartered in Deltacom's footprint."

Deltacom will become a wholly owned subsidiary of Atlanta-based EarthLink. The transaction is expected to close by the first quarter of 2011, according to the companies, and will expand EarthLink's employees from about 575 to nearly 2,000. It's only the latest in a series of recent M&A deals sweeping the broader telecom and service provider spaces.

According to its VAR500 filing, ITC Deltacom's 2009 gross revenue was about $408 million, a decline of 5.6 percent from the approximately $432.1 million it reported in 2008. Under the terms of the acquisition, EarthLink assumes $325 million of Deltacom debt.