A Buyer's Market for Fiber?

August 20th, 2008 by · 5 Comments

TelephonyOnline has an article today quoting Dan Caruso of Zayo and of course neighbor blog BearOnBusiness.  The comments seem to have come from a presentation at some industry event, but the article doesn't say precisely which one.  The crux of his point is one I certainly agree with, that the fruitfulness of Zayo's shopping spree has been enhanced by the distraction of other buyers.  And as he says, this phase is probably coming to an end soon.

But one could argue that the buyer's market has become less favorable throughout 2008, not because of more competition but because of the state of the credit markets.  I think some of these companies, especially TWTC, would have made a move by now if money weren't so expensive, and I doubt even Zayo can get much cheap money right now.  Level 3 probably won't be ready for M&A until Xmas, but Global Crossing could conceivably be a buyer if money weren't so tight.  I could see them making a move on Abovenet, whose NFL-city metro assets probably fit their large enterprise customer base in the USA better than any other set.

I do wonder though if Zayo is temporarily through with M&A or if perhaps they have that final one in the wings that will make them a national player rather than a regional one.  The McLeodUSA fiber or perhaps the remains of 360Networks seem to fit that bill quite well.

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Categories: CLEC · Mergers and Acquisitions · Metro fiber

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5 Comments So Far


  • I don’t think Abovenet sells until they have multiple bidders. You are correct in stating it is a buyers market so long as the buyer has money in his/her pocket.

    Buyers markets typically take place when buyers have no money, so this is not a surprise.

  • I don’t think Abovenet sells until they have multiple bidders. You are correct in stating it is a buyers market so long as the buyer has money in his/her pocket.

    Buyers markets typically take place when buyers have no money, so this is not a surprise.

    BTW the new Captcha is a real doozer. Doesn’t Akismet do a decent job for you?

  • Dan Caruso says:

    The conference was a Cobank-sponsored event for their customers. Cobank is a member of Zayo’s five-bank debt facility.

    I did cite the tight and uncertain financial markets as one of the reasons that will hamper transactions.

    Zayo views every deal as its last acquisition. That is, we view additional acquisitions as nice-to-haves not need-to-haves. The right opportunities need to be out there for us or, otherwise, we will just focus on running our business.

  • Brian Scully says:

    I have noted the continued speculation that the McLeod fiber would be a target for Zayo.

    The McLeod fiber is the final piece of the business that keeps Paetec a viable option in the CLEC market.

  • Dave Rusin says:

    Regardless of conditions, and painting the world with one brush/one color, well run growing fiber-based companies (especially metro) will attract professional buyers of value.

    It’s a global economy and buyer interest is not limited to US buyers only. Foreign PTT’s and related strategics have vast interests in the United States market. Once again, if what you have is unique, well run and producing high margins it will attract serious, value-conscience buyers … lots of them.

    Just last month, multi-billion dollar Cablevision through its Lightpath subsidiary jumped out of the woodwork and bought privately-held 4 Connections in New Jersey. I know for a fact this deal was not single digit EBITDA multiple.
    In addition, like I said above, 4Connections is a well run business, growing and owns unique local fiber assets. For a billion dollar cable company to care about 4Connections is telling about supply and interested buyers.

    Also, consolidation has pretty much stripped out the junk buys which is a good thing for our industry. What is left, I assert, is valued outside the reach of most traditional bottom feeders.

    As it is said, beauty is in the eye of the beholder. And, like land, no one is building out new metro fiber networks … there is a shortage in supply and the large carriers understand this alongside sophisticated financial firms.

    I don’t believe its as much of a “buyers” market. I think it is more of a if you don’t buy right when the opportunity presents itself given limited supply like we have presently, then your only future option in not buying right may be to build — an expensive proposition.

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