Fiber M&A, Who’s Next?

July 6th, 2009 by · 19 Comments

I asked this question last year, and the overwhelming response from readers was that XO Holdings (news, filings) would be the next target for M&A.  But it turned out, none of the companies on my list were consolidated.  I think that is largely because the bottom dropped out of the financial markets, else XO seemed right to me too.  A year later, let’s try it again:

[poll id=”27″]

This time you can choose more than one, which of course means that the percentages won’t add up to 100 so don’t expect them to.  I have included on the list only US based fiber networks that have over $200M in directly related revenues.  There are other assets out there, either smaller or owned by larger foreign telecoms or domestic companies whose revenues are primarily outside the sector.  I also obviously didn’t include Verizon or AT&T, since those don’t seem likely to be acquired any time soon.

As a group, the readers of this blog understand more about these networks than any other anonymous group I know of.  I’m curious what you think, so first vote, then leave us all a comment below to tell us why!

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Categories: Internet Backbones · Mergers and Acquisitions · Metro fiber · Old · Polls

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19 Comments So Far

  • Notrom says:

    S—-It may not be a direct sale, but they have made the decision that something has to be done .
    GLBC—-they have been for sale a long time—-the holdup is price—-they seem to believe they should share in synergies . In my book the benefits of synergies belong to the buyer & should not be considered in the price the seller receives .
    Abovenet—–Metro is in demand—–Abovenet would appear to be a prize .
    Those are my top 3 . I would think that XO & Zayo may go . When will Icahn decide to sell? Who knows .
    Zayo is an LVLT farm team—–Caruso & co may decide they are big enough to cash in their chips or continue to build for LVLT .
    Europe should produce some action—-it seems a logical spot for LVLT .
    LVLT has been the primary consolidator after T & VZ’s big moves . With Unity in hand, acquisitions should be easier to handle .
    We will see what happens re LVLT after the 15th of July —–they will continue to be the primary consolidator . The remaining pieces are too small for the big boys . The question is how much money can LVLT come up with when prices are right .
    The only other US buyer of size would seem to be TWTC —–they are ultra consrvative re their moves .

    • Rob Powell says:

      Personally, I doubt very much whether Zayo will be for sale any time soon – to LVLT or to anyone else. They will likely continue to buy things.

    • Brian Scully says:

      I would remove Zayo and PAETEC from the list. I believe Dan and Arunas both still have plans for additional growth. They may acquire, however they will not be acquired in the near term.

      • Rob Powell says:

        I don’t see Paetec as an acquiree right now either, but leaving those on the list who aren’t likely candidates lets us compare across the sector.

    • Anonymous says:

      GLBC’s claim to synergies is very reasonable. It’s really symantics as the buyer will value based on the post-benefit to its company. If the seller is valued at $100M on a stand-alone (say 6.0x EBITDA), but the value of their network will help the buyer realize $100M in synergies… guess what, buyer will pay more… alot more.

  • banker says:

    Since when does PAetec have fiber?

    • Rob Powell says:

      Since they bought McLeodUSA’s footprint. It doesn’t cover their whole service area, but it is fiber.

      • Mike M says:

        Rob, good call on your part but I think XO has something up its sleeve. It’ keeps growing why sell now when you don’t have a level off point yet. But I am not as well versed as you in this.

  • Mike M. says:

    So every year people keep saying XO yet it does not this one of those things after the 5 the guess it finally happens and people can say told you so. LMAO too funny.

    • Rob Powell says:

      It does seem a bit like that, eh? While XO does seem to be the reader’s choice, the margin is pretty small this year. I’m actually struck by how spread out the votes are this time.

  • TonyDrom says:

    I can almost assure you that no one in the top 3 is going to go any place soon. No one is ready to make a move in these markets yet because they are not stable yet. I also have a friend who works for XO Denver and he says they are in line for a ‘possible’ huge contract that would make them more a month then they currently get from all customers combined…if so I don’t see Carl I letting it slide when he can pocket that money.

  • Dave Rusin says:

    The carrier that gets the price they want will be bought … we are living in different times than the telecom meltdown.

    Lot more healthy carriers with no need to sell at the “going rate” than sickly distressed situations.

  • Tyler D. says:

    Integra Telecom could also be a target. They have a small fiber footprint and need the cash to avoid defaulting. I doubt anyone will take the whole company but it could be broken up and sold.

    • Rob Powell says:

      That’s interesting… Because they are private, I know little about Integra’s finances. However, I completely forgot that they might fit the criteria to be in this poll, thanks for the reminder!

  • Dave Rusin says:

    I know of Integra but not their financial condition. It would be unwise to state they “need cash” unless you can verify such a statement. Such statements can (and may) be used against Integra in a competitive situation.

    Facts are important over innuendo.

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