Kelly Teal over on the xChange blogs is hearing rumors of a merger between NuVox and PAETEC (news, filings) or between NuVox and One Communications. A couple months ago, NSP Strategist mentioned that NuVox had refinanced its debt and was looking to buy something, also mentioning One Communications. NuVox is a privately held CLEC with annual revenues above $500M, but beyond that little is known about their financial situation. Their network map shows extensive assets throughout the southeast and lower midwest.
While these rumors have NuVox in the buyers seat it sounds to me as if NuVox is the one on the market. They are smaller than both of these potential targets, and in this environment they are less likely to be the one that could muster the resources to pull it off. Consolidation amongst CLECs is taking a breather only because of the credit markets, otherwise the trend continues to be ‘bigger is better’ in order to achieve the scale to compete. Besides, there could always be an equity deal. In particular, a combination of One Communications and NuVox would seem to be the most possible, as both are in the hands of private equity holders who can make happen whatever is best for themselves without too much trouble. If they want to, obviously.
On the other hand, rumors of this sort are often trial balloons – to see what happens when one stirs the pot. I can’t see the larger fiber backbones buying NuVox for the revenues right now, there are better targets if such money is available. But looking just at the assets, NuVox would seem to have substantial synergies with itcd given the substantial market overlap and the fiber assets of the latter. The only problem there is that neither side is likely to be able to raise the money to pull it off.
But one has to ask, “Why now?” Unless NuVox really needs to make a move, I think these rumors are probably just talk. But then again, you never know.
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