XO Reabsorbs Nextlink

June 29th, 2009 by · 4 Comments

As an separate entity, broadband wireless provider Nextlink apparently no longer exists.  The company’s website now redirects to that of XO Holdings (news, filings) itself with this statement:

XO Communications has realigned its product offerings by integrating the Nextlink Wireless, Inc. broadband wireless products and services into the company’s existing Business Services and Carrier Services business units.

In other words, XO has quietly disassembled the unit and absorbed the pieces.  No doubt most of the revenue will go to the carrier services division, since it was mostly wireless backhaul.  The move will probably let XO save some money by reducing the overhead needed to run it as a separate segment.

As reorganizations go, this one is not terribly surprising of course, given that Nextlink never got much traction.  It was created to preserve and exploit the LMDS (28-31Ghz) and microwave (39Ghz) spectrum licenses owned by the company since pre-bubble days, but it never figured out the latter portion.  Revenues in the first quarter of 009 were a mere $1.26M, and of that over 70% was to XO Communications itself.  External sales therefore were something less than one might expect from a reasonably successful single fast food franchise.  To be viable, it would have needed to grow sales by at least an order of magnitude but it never did.  Nevertheless the company did manage to satisfy the FCC requirements for renewing its spectrum licenses.

That was always widely considered the main (if not only) goal from the beginning, but by now even they must be wondering what value those preserved licenses have.  After all, if you can’t generate cash flow from the spectrum, why own it?  The story of LMDS spectrum has had horizon of  ‘in two or three years’ since the last bubble burst, but even now when wireless backhaul looks set to take off it doesn’t seem to be helping.  It’s not that it’s a bad business, but owning the spectrum doesn’t seem to be a major factor – leasing it where needed is inexpensive and easy.  More important are the types and locations of the markets served, and Nextlink’s spectrum didn’t really match the right geography.

That could change of course given the wireless data explosion, and XO will still be in the game if it does.  But by reabsorbing Nextlink, they seem to be acknowledging that LMDS for wireless backhaul will have the most relevance from within a hybrid fiber/wireless perspective.   In other words, we’re no more likely to see pure wireless backhaul networks than we are to see metro fiber go to every single tower, each brings something to the table but not a complete solution.  If the solutions are all integrated, separating the business models makes little sense.

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Categories: Metro fiber · Wireless

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4 Comments So Far

  • Tony D says:

    What does this mean Rob? Are they setting this up to buy someone or something. Is this company setting itself up to be huge down the road?

  • Rob Powell says:

    To me, it seems like the kind of thing XO would do to spruce itself up before selling out. But I’ve beat that drum often enough already. I don’t see XO as an acquirer right now.

  • Justin says:

    Rob, any idea with the large share order today? Any possible rumors? XO is up 22 cents or around 80%. No news…

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