As I thought might happen, abvt seems to be ready to leverage its success over the past several years to do launch an aggressive expansion into new markets. After managing to maintain a torrid growth rate and EBITDA margins in the mid 40% range during a recession, one has to wonder what they have planned for a recovery. Just before the new year, the company drew down the remaining $24.57M of its Delayed Draw Term Loan, though for current operations it has no need for that money. And this week in an interview with Reuters, CEO Bill LaPerch discussed continued growth driven by its financial customers and offered the following quote:
"Over the course of this coming year, I'm confident that you'll see us announce our expansion into additional markets, both in the United States and on a global basis."
Hmmm, I wonder what markets Abovenet will target? First let's consider what Abovenet does best: Tier 1 cities, the biggest of the big. Domestically, the largest metro fiber markets Abovenet is not currently in are probably Miami, St.Louis, and Denver - maybe Charlotte NC, Cleveland and Detroit too. Miami seems the likeliest target to me. Internationally, Abovenet is only in London right now, and therefore expansion is most likely to be one or more of the other European major hubs, i.e. Frankfurt, Paris, or maybe Amsterdam. But interestingly enough, long ago Abovenet used to be in each of those markets - back during the bubble days before the world of MFN imploded. Those assets now lie in the hands of euNetworks.
And that brings up the question of whether Abovenet will be expanding organically or inorganically. With their stock price doing quite well and the credit markets open, it seems rather possible that the company might find it quicker and cheaper to buy and integrate some assets rather than build out from scratch.
In Europe, euNetworks would be an obvious target if it were available, though I suspect that CEO Brady Rafuse might not be ready to move on so quickly. But another idea would be Viatel's wholesale backbone VTL Wavenet which amazingly continues to exist independently and which I believe also has some metro fiber rights obtained in a complicated swap for longhaul fiber with euNetworks.
In the USA, I'm thinking AGL Networks would fit well - offering additional depth in Atlanta and Phoenix as well as the new market of Charlotte. Other possibilities might be FPL Fibernet or Southern Telecom. Noticing a pattern here? All three are divisions of southern-based energy companies, operate mostly in larger cities, and own their networks at the conduit level. But that's just a wild guess on my part.
But Abovenet has been doing so well organically, they just might continue on that path.
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