M&A Journal: More Fiber For Sale

June 17th, 2010 by · 11 Comments

Seems like every few weeks another fiber provider puts itself on the market.  In 2010 so far we have seen Zayo buy AGL and Lightower buy Veroxity, while Fibertech, NSTAR, and Intellifiber are known to be soliciting offers.  But according to the Wall Street Journal, there is now yet more metro and regional fiber for sale: Alpheus and KDL are apparently on the block as well.  Assuming they are right (I will seek more information), here are a few comments about each:

  • Alpheus Communications - All Texas all the time, with 3000 route miles and 275 on-net buildings which are mostly of the wholesale variety with a special focus on central office coverage, although they have been addressing the enterprise market more of late.  Who would want Alpheus?  Texas is prime property, and any of a number of providers could want these assets.  Zayo has some fiber in Dallas and would surely be interested.  TW Telecom and Level 3 both have substantial footprints in major Texas markets and might see the benefit of scale. Even PAETEC might find the fit with the McLeodUSA fiber to be quite interesting.
  • KDL - Kentucky Datalink offers regional fiber throughout the industrial Midwest and Appalachia, with many unique routes and loops reaching places nobody else even has on their radar.  There are more than 30,000 route miles in all, along with over 500 PoPs.  KDL (or its parent Q-Comm) itself bought midwestern provider Norlight a few years ago for $185M or so, and prices aren't worse now so you can see this would be a pretty substantial deal.  However, the company's geography and approach is highly specialized and largely off the beaten track, and finding a buyer amongst existing operators that makes sense is a bit more difficult as a result.  I think private equity might be more likely here, although either Zayo or TW Telecom could be interested.

Honestly though, of all these fiber networks looking for buyers, the one thing they have in common is that none really need to sell.  Rather it is often their backers looking to cash out while prices are good, and that means that a fair number probably will simply not have their price met. But still, it seems clear to me that some will find those buyers, as metro fiber is very hot right now with private equity and there seem to be some big ideas floating around backed by some very interesting money.

Categories: Mergers and Acquisitions · Metro fiber

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