Verizon and XO? The Rumor Mill Spins On

February 4th, 2016 by · 15 Comments

Over on TMCnet, Peter Radizeski and Rich Tehrani are talking up a rumor, and it's a big one for the sector. Is Verizon about to buy XO?

Actually, I've heard this rumor making the rounds too, with an unverifiable figure of $1.9B being bandied about as a price tag. Yet I'm more than a little hesitant to believe any of it.

Since Icahn took the company private, XO has been a bit of an enigma that outsiders have a hard time putting a valuation on.  They are likely rather smaller in terms of revenue than we last saw them prior to when Icahn took the company private in 2010, as they have gone through several streamlining processes and aren't known to have spent capex at the levels of their peers to add footprint depth etc.

But according to the rumor, Verizon's supposed interest doesn't derive from XO's fiber assets or its nascent cloud efforts or its enterprise customer base, but rather from its nearly forgotten LMDS spectrum holdings. XO has long curated a large portfolio of that spectrum, obtained back during the dot com bubble. But aside from some small successes in fixed wireless connectivity, they have made little progress monetizing it over the years.

A big part of that is that LMDS spectrum (28-32Ghz) has its limitations operationally, and backhaul spectrum in these higher frequencies has always been more plentiful than demand. It's been relatively easy and cheap to lease, and hence most with a business case to use it have taken that path. Has the combination of wireless data juggernaut, small cells, and 5G conspired to shift the balance of power in LMDS's favor such that the big operators now envy XO's stockpile?  I suppose the shorter distances and larger potential payload make it an interesting idea, but I'll believe it when I see it.

That being said, Carl Icahn really should have sold XO years ago.  If Verizon or anybody else makes him a reasonable offer then he really ought to take it.  He probably won't, but he should.


Categories: CLEC · ILECs, PTTs · Mergers and Acquisitions · Wireless

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15 Comments So Far

  • Anonymous says:

    If the spectrum thing is accurate, I would suppose that makes some sense. Outside of that, I cannot imagine what possible purpose such an acquisition would serve. Sell the rest off and get rid of the entire staff?

  • schmuckinsurance says:

    I would be stunned if VZ buys the company with the shareholder trial finally underway.

  • I have been told that Icahn doesn’t want to sell XO. He likes the NOLs. But the company has been on pause for a long time. The customer base and the spectrum would be worth $1.9B easily.

  • schmuckinsurance says:

    Word around the rumor mill is that Icahn has used up his NOLs.

  • richard says:

    Can somebody explain what NOL is and how it works?

  • Anonymous says:

    ….XO already does a tom of business with vz wireless thus they could just lease it to VZ and call it a day

  • Profile photo of David Rohde David Rohde says:

    I agree with you, Rob, that Icahn should have sold XO before now. In fact I get a little laugh every time I hear Donald Trump say that people should vote for him because Carl Icahn has endorsed him and Icahn is supposedly such a smartypants.

    For a while in the enterprise market, XO was a nice competitive offset for those who knew to get bids from them for simple circuits and high-bandwidth Internet links on which their incumbents weren’t lowering prices fast enough. It’s always nice to have a second-tier kicker in a multi-round RFP situation like that. But now with the far more complex transformational needs that enterprises have domestically and globally, and the rise of Level 3 and (hopefully soon with their assets) Zayo into serious contention, XO’s failure to keep up in both physical buildouts and sales & technical employee expertise is threatening irrelevance beyond SME type customers.

    It’s probably a stroke of luck that they have spectrum holdings like this at a time when they’re so valuable. If LMDS spectrum really fits into Verizon’s 4G/5G plans then this is possible, and if so, Icahn better not miss this opportunity. If this is just empty spin, which is also possible, then it’s just a temporary lark of a story.

  • Anonymous says:

    Word at xo is this is a done deal…..

  • schmuckinsurance says:

    I know Icahn has had a rough go of it investing and he is finally in trial for his XO buyout but VZ seems like more of a asset purchaser here(wireless) than the entire company given they have let it be known they would like bidders for their enterprise division.

  • Anonymous says:

    It’s official. Announcement came out this morning.

  • MM says:

    Doesn’t Level 3 have wireless LDMS assets purchased from someone years ago. Seems to ring a bell. Anyone?

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