Zayo Now the Proud Owner of Fibernet Telecom Group

September 10th, 2009 by · 8 Comments

Upstart fiber network operator Zayo Group (news, filings) has closed its acquisition of ftgx, bringing the latter’s colocation and interconnection services underneath Zayo’s growing umbrella.  Soon after the acquisition was announced in May, a rival bid by RCN Business (NASDAQ:RCNI, news, filings) threatened to knock Zayo’s acquisition train off the tracks.  However, after a couple weeks of negotiations RCN dropped out of the bidding and now it’s all done.  So what will Zayo do with the Fibernet assets?

Create a new business unit of course!  The company is already divided into Zayo Bandwidth, Zayo Enterprise Networks, and Onvoy Voice Services, however none of those really match up with Fibernet’s main business.  So they will make a fourth, still unnamed unit, this one focused on colocation and interconnection – which frankly seems like a natural addition to the family.   But I think the biggest contribution the Fibernet acquisition makes to Zayo is simply a real economic presence in the largest data centers in the NY/NJ metro area.  That will open many doors they might not have had the chance at when their main markets were Philadelphia, Indianapolis, Memphis, and Columbia WA – great places of course, but not of the same scale.

Over on BearonBusiness, Zayo CEO Dan Caruso has broken his silence about the deal in the first post in a series.  Of course, he *had* to be silent about it while actually inside it.  But now that the deal has closed he is hinting at revealing some of the behind-the-scenes details this week, including some related to the RCN bid that Dave Rusin and I speculated some on back then.  You can tell he’s been itching to put in his two cents, but of course there’s still a limit to what he can reveal.  No doubt he will shoot countless holes in my own, uninformed opinions – stay tuned…

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Categories: Datacenter · Mergers and Acquisitions · Metro fiber

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8 Comments So Far

  • anon says:

    this acquisition presents alot of risk to zayo.. data centers and colo’s were some of their best customer / biz dev generators and now they are competing with these folks. so, assume they never sell another hi-cap circuit into a telco hotel and, conversely it seems unlikely that any data center or telco hotel will be excited about allowing a competitior into the room. they will divest this “meet me room” asset in a year or so or will risk destroying its value it has

    • Rob Powell says:

      Actually, I think that’s a pretty good point to ponder. One could argue that Fibernet’s success was at least partly due to its neutrality to intercity bandwidth providers. Does Zayo’s ownership change that balance?

  • T says:

    From the inside, our customer feedback so far has been extraordinarily positive about this acquisition. Zayo’s reputation for being responsive, flexible and easy to work with has caused our customers to provide lists of companies on a regular basis that they wish we would purchase. Plus, with how well the other companies have been integrated so smoothly–it’s really an odd place that I personally would never thought we would be in. My confidence is unshaken that Dan will lead us through how to make sure this is a great move both for our customers as well as Zayo. I’ve learned that just because you don’t yet know how Dan has planned to overcome any obstacles…that “stay tuned” is the best approach I can offer to those on the outside.

  • anon says:

    by all accounts, zayo is well managed. but my point is different – the issue is ‘structural’ — one simply cannot be a carrier and run a “carrier neutral” meet me room (this is why 60 Hudson, et al exist, the tandem is a block away and its only deficiency is that it isnt netural).

    on related notes, the carrier neutral data center owners in/in other markets control alot of hi-capacity business and now have every reason Not to send it to zayo. second, why would another carrier (e.g., backbone or clec) continue to deploy capex into a facility “guarded” by zayo (another carrier) loop. ??? this is why equinix and switch & data don’t own local clecs, etc.

    zayo’s good reputation and mgmt competence does not defeat gravity or other bedrock principles — i.e., the power of self-interest in the free market. this is a classic over reach – sloppy m&a

  • T says:

    I understand your issues, but I think you severely underestimate the m&a team, their understanding of the industry, and their ability to position Zayo to do what others have not been that successful doing in our industry. I was a naysayer at times when I first heard Zayo was buying so many telco’s, merging, expecting to run them well/appease the giants, who were actually enjoying buying from some of the smaller regional providers. However, Zayo has more than proven to me that smart people, who “get it” will find a way to succeed–and surpass expectations. I can guarantee (knowing the m&a team personally) that the idea of carrier neutral wasn’t something just missed or not understood. It would take quite a fool to not understand the benefits of supposed “carrier neutral” spaces vs. a Zayo owned facility. I know without a doubt there are no fools on that team at Zayo. Anon–Do you really think all the highly strategic investors and this well-seasoned management team skilled at acquring undervalued/underutilized/up and coming networks and making them into highly profitable/well-respected entity did that with an M.O. of being sloppy??? It’s just not even something I can wrap my mind around as a remote possibility. The good news is that time will tell…and from what I’ve already lived–the story will have nothing to do with sloppy and more to do with “Dang–why didn’t anyone else think of that.” Of course, as an employee, you know in which ring I will be throwing my hat. Again I still must say…stay tuned.

  • anon says:

    thanks. turns out there is nothing to wrap a head around. according the ‘bear on business’ blog the nyc interconnects were precisely the reason zayo did the deal. and zayo is forming a “carrier neutral” colocation (and, presumaby, oxymoron services) subsidiary.

    wow, all very confusing – are they now going to compete with sdxc and eqix? does this signal that there are no high capacity fiber opportunities which are more attractive? fibernet, as of 1H09 appeared to have no net income per share and no positive cash flow from operations?? what was bought?

  • Tarheel says:

    Looks like the axe has begun to fall. Large number of former FiberNet staff have been terminated, sales people (individual contributors and management) have decided not to join the Z team (having raised their quotas in some instances in excess of 100%), product offerings being affected negatively (i.e. hubbing). The general sense from customers at the FiberNet (Zayo) annual golf outing yesterday is that the once friendly confines of FiberNet are being replaced by the “O” boys (CarusO, ScaranO, RussO…) with a sense of arrogance, my way or the highway attitiude… Level 3 Lite anyone…

  • Anonymous says:

    As a former employee of FiberNet, Zayo sux all around.Now u may think I am saying that as a disgruntled employee, but that is NOT the case. I just watch how they do things. Something is not right there. Bware of these folks!

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