Telecom Ramblings

The boom in datacenter construction continues unabated, today with plans for two new facilities by Equinix (NASDAQ:EQIX - chart, news, filings) and Digital Realty Trust (NYSE:DLR - chart, news, filings).  

Equinix is adding a second datacenter in Hong Kong, to be titled HK2 in their usual fashion, which will be built in the western part of the New Territories.  The new facility will cost $63M and house 1450 cabinet equivalents when complete, although phase one will start with [Read more →]

According to an article by TechCrunch last night, Cisco Systems (NASDAQ:CSCO - chart, news, filings) has made a pre-IPO bid for Skype (news, filings).  Now, it’s hard to discount the possibility given that Cisco has been buying everything that isn’t nailed down and superglued just in case.  It has also been rumored that Cisco has bid for Skype once before, and there are no structural reasons why they couldn’t do this out of petty cash.  I’m just having trouble finding a convincing rationale *for* such a deal. [Read more →]

Given the surge in M&A activity this year, I thought it might be worthwhile to take a look backwards and remember some of the mistakes made in acquiring and integrating telecommunications assets over the past decade.  After all, too large a percentage of M&A activity winds up destroying rather than creating value and you know what they say about those who forget their history.  Now, this list is of my own creation, but I’m hardly the last word on the subject.  Hence, I’ll keep it open to further additions, details, and corrections from readers, so don’t hold back.  These are not in any particular order. [Read more →]

For your Friday reading pleasure, take a look at this one over on Data Center Knowledge.  Imagine coming in one morning to see a co-worker passed out on the floor with a .45 semi-automatic on the floor next to him, and your $100K server full of holes?   After waking him up, he tells the police what may be the lamest story of the week about someone mugging him, drugging him, stealing the gun, shooting the server, then apparently forgetting the gun.  Actually, [Read more →]

Seemed like it took a rather long time to close, but ABRY Partners has finally completed its acquisition of RCN.  The $1.2B deal was originally announced five and a half months ago back in March, and the question I had at the time is what ABRY’s intentions were toward the metro fiber arm of the company, RCN Metro.  That question is at least partly answered. [Read more →]

For a small company, FiberLight has had a voracious appetite for organic expansion lately.  The builder and operator of metro fiber networks is expanding its networks deeper into Virginia, announcing today its plans for a new route to Charlottesville.  The build will extend the Culpeper route the company constructed last year by some 46 miles and complete a direct connection to the Washington DC area and the other 500 route miles they have in the region. [Read more →]

According to reports, private equity firm Court Square Capital Partners is buying up Fibertech, taking it off the hands of Nautic and Ridgemont Equity, which used to be part of Bank of America.  The value of the deal was pegged at $500M, though the extent to which that number has been rounded off is unclear to me.  Fibertech builds and sells/leases metro and regional dark fiber in tier 2/3 markets across the northeast and mid-Atlantic, plus a couple in the Midwest.  Court Square will pay for the deal partially via its own funds, partially via debt to be raised, and partially via an investment by Fibertech’s management. [Read more →]

I have been travelling for the past 36 hours, and since that included all of a Tuesday I have some catching up to do now.  Here’s some rapidfire responses to recent news items:

Juniper Networks (NASDAQ:JNPR - chart, news, filings) won a new customer for its Meda Flow Solution.  CDN challenger BitGravity will use it to overlay on its distributed origin architecture.  They hope to gain improved scalability, allowing them to grow quickly while adding fewer servers and thereby [Read more →]

Level 3 Communications (NASDAQ:LVLT - chart, news, filings) continued its sustained PR blitz with two more contract wins so far this week.  

Yesterday it was a three year deal with transportation solutions provider CAP Logistics.  Level 3 will provide a package SIP trunking, IPVN, colo, and dedicated internet access, which will be deployed in Denver, Salt Lake City, Houston, and Illinois.  An interesting mid-market win, and they need [Read more →]

A few weeks ago, Dave Rusin over at Telecom Straight Shooter posted this article previewing some nice new work by Andrew Odlyzko from up at the University of Minnesota.  Dr. Odlyzko is of course very well known in the bandwidth world for his independent research on traffic growth rates amongst other things.  Dave included a letter from him seeking data from the movers and shakers in the industry, focusing on the telecom bubble of a decade ago.  To quote Dr. Odlyzko’s email: [Read more →]

Following up on updates to my revenue/capex and EBITDA margin/cashflow posts, we take a look at the overall relative valuations across the sector since the first quarter of 2008.  The metric here is the ratio between Enterprise Value and adjusted EBITDA, which is a common way of looking at valuations in this sector.  Missing from the comparison are Sprint Wireline and RCN Metro, simply because we can’t calculate an EV for them as they are not separately traded.  With no further ado, here is the updated chart: [Read more →]

In the previous post, we looked at relative revenue growth and capex trends, updating my competitive telecom trend charts for the second quarter.  But while revenue growth is important, profit is obviously moreso.  Comparing profit directly doesn’t tell us much because it has too many pieces, not the least of which are very different levels of debt and amortization.  In telecom, the common metric to measure the performance of the operations independent of the balance sheet is EBITDA – which has its own warts but gives us a commonality with which we can do comparisons after normalizing by revenue to get EBITDA margins.  As always, EBITDA margin varies greatly depending on business model, with fiber-heavy companies having high EBITDA margin and high capex, and fiber-light companies the opposite.  Here is the latest graph showing EBITDA margin trends across the sector since the beginning of 2008: [Read more →]