In a month it will be two years since TW Telecom announced it was buying Xspedius, expanding its markets dramatically. For all practical purposes, they must be done with the integration and I’ve been expecting them to make a followup move for a while now. There has been speculation that they might be a target, e.g. of Level 3, but the strategic situation seems to favor them being the buyer and not the buyee. Why? Let me list the reasons:
- They have a great platform on which to put more revenue and assets
- They still have holes, they remain weak on the Washington-Boston corridor, and frankly that is a lot of opportunity left on the table. They lack fully owned backbone as well.
- Their stock remains strong and can be used as currency in an acquisition despite the state of the financial markets, and they don’t have any debt maturities anytime soon.
- Many other bidders are currently on the sidelines, especially with Level 3 still on crutches.
And there are many targets out there that seem to be an excellent fit for the price. XO brings both the backbone and fills metro holes on the east coast, if one can just find a way past Icahn. Abovenet would add tier-1 depth as well. RCN Metro would add substantial regional capability in the northeast. All three are surely available if they want them, and that is just at the top of the list. So what is holding TW Telecom back? Is it only caution?
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