After messing around with Level 3’s public information about its lit buildings, I decided to look at another company that also provides nice quantities of information about its lit buildings: Zayo Bandwidth. Zayo, one of Dan Caruso’s companies, also provides detailed maps of its extensive regional and metro fiber plus an on-net building list, and it is possible to glean information out of them. Of course, these maps and tables are not totally current (though they are recent), and obviously do not contain the assets of Columbia Fiber Solutions since that acquisition has not (I believe) closed.
First off, Zayo’s footprint is more concentrated than we might have realized. Their network spans 125 markets with all that fiber, however it has only 10 or more lit buildings in only 20 of them, listed here:
| Market | State | Total |
|---|---|---|
| Philadelphia | PA | 438 |
| Memphis | TN | 160 |
| Indianpolis | IN | 122 |
| Allentown | PA | 48 |
| Washington | DC | 47 |
| Harrisburg | PA | 38 |
| Lafayette | IN | 33 |
| Scranton | PA | 31 |
| Minneapolis | MN | 29 |
| Fort Wayne | IN | 28 |
| Muncie | IN | 19 |
| Lancaster | PA | 18 |
| Pittsburgh | PA | 18 |
| Baltimore | MD | 16 |
| Columbus | OH | 16 |
| Ann Arbor | MI | 11 |
| Reading | PA | 11 |
| Toledo | OH | 11 |
| Akron | OH | 10 |
| Lansing | MI | 10 |
These top 20 markets have over 80% of all Zayo’s lit buildings. In fact, just three markets – Philadelphia, Memphis, and Indianapolis – have over 50% of all of Zayo’s lit buildings. Each came from a different acquisition of course: the Philadelphia market came from PPL Telcom, Memphis from Memphis Networx, and Indianpolis from Indiana Fiberworks. We can now see the Columbia Fiber Solutions acquisition in a new light – Spokane will be the anchor city for that region just as Indianapolis and Philadephia are for theirs. Perhaps a regional network to go with Memphis is somewhere down the pike?
The second thing we may not have realized about Zayo Bandwidth is that in their two biggest markets – Philadelphia and Memphis – a large percentage of their lit buildings aren’t actually buildings. They are cell sites. That’s right, Zayo is apparently a very large player in the fiber-to-the-tower market in these two cities. In fact, when Zayo says they have over 400 additional lit buildings under construction to be completed this year, the vast majority are listed as pending cell cites in these two markets – over 300 in Philadelphia and over 80 in Memphis. So Zayo isn’t engaged in a broad expansion of lit buildings across its footprint, rather it seems to be implementing several tower backhaul deals – huge ones in fact.
Finally, since I already compiled the data on Level 3, we can derive where Zayo’s (120+ markets) and Level 3’s (180+ markets) really compete much at all and where they don’t. If we count the markets where both companies have 10 or more lit buildings (admittedly primitive), we see that by this definition they only really compete in 9 markets – 6 of them in Pennsylvania and the rest not far from it: Philadelphia, Allentown, Scranton, Harrisburg, Lancaster, Pittsburgh, Baltimore, Columbus, and Washington DC. Hence, Zayo and Level 3 really compete with each other only in the mid-atlantic region, any additional overlap they have is not really too meaningful and their remaining assets are complementary. For instance, Level 3 has little presence in the Zayo strongholds Indianapolis and Memphis, nor does it have any at all in the soon-to-be Zayo stronghold Spokane.
Interesting, to me at least. I will look at other company’s footprints now and then, at least the ones that are kind enough to publish enough data to be interesting.
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Categories: Mergers and Acquisitions · Metro fiber
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I have always believed [& I believe, have in the past stated] that Mr Caruso has found a niche in the telecom business . That niche is to be an assembler of telecom assets which are not large enough to interest larger cos .
By placing them in one co , he creates an entity which becomes large enough to interest an acquirer .
The most logical acquirer , as your work tends to support, is LVLT.
I believe I have referred to Zayo as an LVLT farm club .
Mr Caruso’s talent/ability is to be admired . He did very well with this game plan in a previous sale to LVLT.
I recollect reading his comments about selling too cheaply to LVLT . An unsolicited word of advice to Mr Caruso— don’t get greedy . A good deal is one where both sides make money .
Morty
Morton, you are funny! At 25 times invested capital, his last sale in aggregate, that was very greedy! Passively, you and I have paid for that without any measurable returns to date.
As a matter of fact, it resembles more “creative destruction” for now.
Maybe a better comment to this Kiewit mob guy is, don’t dare bite the hands that are feeding you.
As for Mr. Crowe, he should keep his minds eye on Mr. Killinger in the news this weekend.
Shareholders’ have had enough, and they’re not going to take it any more!
Now morty, LVLT doesn’t get to have farm clubs until it finishes working its way back up to the majors, if you know what I mean…
But I don’t get the sense Caruso wants to do anything other than build his own empire so far. If he can operate it better than others, it will be he who continues to vacuum up the assets and not another.
Personally, I still think LVLT’s most natural target after they get over their indigestion is GLBC. Zayo on the other hand still has quite a few small but tasty fiber assets to choose from yet – what they don’t have is any particular reason to sell, so any buyer would have to pay a hefty premium.
Rob,
good stuff on zayo’s tower backhaul stuff…now ask yourself how that business would mesh or benefit w/envysion….
Rob, Please tell us how a company who was preparing its stakeholders for almost five years regarding gluts which would inevitably turn scarce, didn’t prepare properly-building integrated software platforms- in anticipation of the turnaround, while knowing internally that, they would need to make acquisitions, especially after the telecom bust/zombie ressurections-in order to capitalize timely, and efficiently? Oh yes, I forgot, Kevin O’Hara! But what about Jim Crowe? He wasn’t under the surgeon’s knife for five years before the dreaded October, 2007, a day that lives in infamy for the shareowners on his ship.
And, he mentored Dan Caruso to shake his investors down in the final analysis, also, right?
All without “non competes,” etc.
I would agree that Crowe was amongst those that dropped the ball. I’m also sure he knows he has to fix the situation.
As for non-competes, those usually don’t last more than a year or two at most.
Hi Rob,
Slightly off topic, but shouldn’t the site owner’s comments be picked up in “Recent Comments,” when he does choose to reply?
Carl
It is an option, I had actually forgotten I had set it to ignore my own comments as a test. Do you prefer it when my comments show up there?
Indeed, and thank you. I now know when I am not speaking to myself, at least with respect to the site owner.
Back to Jim Crowe. 🙂
Do you think he has behaved fairly or honorably in front of his shareholders by making that consistent “sucking sound” all of these years, with very low priced stock options-grants and otherwise- and no money of his own-mostly-in conjunction with the expectations he has set, relative to LVLT’s performance?
These top executives have added to our pollution/dilution for too many years, at the same time smiling all the way to the “options candy” bank, while openly bragging that, “Money is never a problem for LVLT.”
Moreover, they have done nothing officially or publically to prevent “Bear Raids,” which certainly created a self-fulfilling prophecy of its own-feeding on itself- further compounding the dilutionary effects due to potentially abnormally low stock prices for “issuance” inside of prior difficult periods.
Difficult periods, like the ones we still appear to be in, 10.5 years later.
Whether or not they have behaved ‘honorably’ is frankly beside the point when it comes to investing and the market, there one has to look at where self-interest points. Just ask Icahn and XO. But I think Crowe has done his best for the company, and has also made sure he is as well compensated for his efforts as he can manage – I would expect nothing less of him or any other executive.
It is easy to point out mistakes in hindsight and also to say other paths would have succeeded where the ones chosen did not, but it is much harder to actually steer the boat through the hurricane in real time.
A concensus seems to be brewing that he assist his “self interests” by ponying up some of his own “money” so that his “skin” is in the game too. This would be according to the same expectations he boldly lays out for investors in his company.
Not too long ago, Mr. Toddforthree implied that might be coming in another one of his illusive comments.
I hope that he is right surrounding common shares, more so about Jim Crowe than Walter Scott.
With regard to “self-interests” and Adam’s “Invisible Hand,” which you may be alluding to, maybe Mr. Crowe was put in charge of this enterprise to continue extending societal benefits to users only-free internet, “not in our price book” services-with no intentions of ever letting his shareholders dine with him.
Today’s conference leads me to believe PFCF is not showing up in Q3.
And, without a financier to appear magically in their favor, Dan’s lit buildings remain another PIPE dream for some time.
wow. I was on the road all week and wasn’t keeping up with my blogroll. I didn’t know of this post. Just read it and all the comments.
Let me add some thoughts and clarifications. Rob, thank you for writing about Zayo. You should feel free to send us questions as we are happy to provide more info. Matt Erickson is the best person to ping with questions.
My intent is that Zayo will be a long term player in the telecom industry. We are not interested in selling ourselves to Level 3 or anyone else. Everything we do is from the perspective that we want to be part of a well run telecom entity for years and years to come.
Yes, we are very active in the FTT space. A lot of our growth is related to FTT. We are adding a ton of tower sites and lots of other key wireless locations e.g., MTSOs. Having said that, we are adding other on net locations as well for our customers. If we do a good job, we will be extending our networks and adding buildings for a long time to come.
Mr. Morton: my comment about selling ICG for a price favorable for the buyer is heart-felt. We handing over a great business and great asset. I don’t know what they have done with it but I know it would be worth $250M or more had we kept it.
highwayman, envysion will be kept separate. I believe envysion will prove to be one of the most successful start-ups in Boulder area history. It will take two more years to prove me right or wrong, but you heard it on “telecom ramblings” first. Steinfort, Hagens and team are doing a phenomenal job.
one more thing: Rob, how did you like the map and building info on web site? How does this compare to others?
Also, you might be interested in seeing Zayo’s overall mapping capability. We map other’s network against ours. If interested, ask Mark Minor to give you a quick tutorial. It is fascinating.
When did an entity with venture capitalists at its core, morph into a build, buy and hold telecom company without an exit strategy?
I bet they’d be a seller at 25 times invested capital again. Probably much less the next time.