Transatlantic cable operator Hibernia Atlantic and US backbone and the competitive carrier XO Holdings (news, filings) announced an interesting partnership this morning. The two companies will swap complementary capacity, allowing each to extend its network reach. XO gains both a capacity boost and extra diversity for its IP network to and within Europe. While XO hasn't ever had a major presence overseas, they did add transpacific capacity just about a year ago simply to improve their IP backbone cost structure and reach. Since I doubt they are making a major move on a new continent right now, this deal is probably aimed along the same lines.
For its part, Hibernia Atlantic gains terrestrial capacity on XO's US backbone and metro facilities, which will help them continue their transformation from a simple cable operator into something more complex and interesting. The company expanded westward and southward in 2009 along dark fiber IRUs, and their network now reaches the Pacific Ocean and the Caribbean as well as the Atlantic. Might there be a Hibernia Pacific someday? Nah, they'll probably take a while to consolidate and deepen their business across the US while the bandwidth from Unity, AAG, and TPE works its magic on bandwidth pricing further west.
As partnerships go, Hibernia and XO match up pretty well. They don't really compete against each other in many markets and have mostly complementary assets. In fact, if it were anybody but XO I'd be suggesting the two might just merge and get it over with. But of course, it is XO, which means nothing of that sort will happen until its majority owner Carl Icahn finishes scratching whatever itch it is he has left to scratch. So what's next? For XO of course they have that preferred stock to refinance at the last minute, as usual. For Hibernia? They have many options, should be an interesting year.
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