The consolidation wave in metro fiber continues to grow. First there was AGL, then there was Veroxity, and Fibertech and NStar are known to be seeking bids as well. But in the past few days I have heard from no less than three independent sources that the next to go very well may be Intellifiber, which is of course the metro and regional fiber arm of Cavalier Telephone. If true, it would surprise me a bit as Cavalier's CEO Danny Bottoms came from the metro fiber side of things (formerly of OnFiber) and I suspect he values the assets higher than most.
Intellifiber has taken a collection of castaway fiber networks and assembled them into something with real value. Their most extensive assets are in the regions around Philadelphia, Baltimore, and Washington DC where they have deep central office penetration and many unique coverage areas. But they also have some interesting holdings in the Rust Belt and in upstate New York, plus some unique longhaul routes that derive from Dominion Telecom's buildout a decade ago. Some of the rumors indicate a deal is near, however I have no indication yet who, if anyone, might be doing the buying. That of course won't prevent me from guessing, so let's run through a list of likely suspects:
My top candidates:
- Zayo - You can't count out Zayo in any metro fiber M&A discussion, and in fact Intellifiber's assets looks like a very good fit for them. Such an acquisition would give Zayo real depth on the I-95 corridor from Virginia to New York, a complementary footprint in the Midwest, and new markets in upstate NY - all linked together with regional fiber.
- ABRY Partners - With the RCN acquisition about to close, I can't shake the feeling that we haven't heard the last from RCN Metro. When I line up Intellifiber's footprint with RCN Metro's, they are extremely complementary, and I doubt that has escaped ABRY's notice. Other private equity could also be sniffing around of course.
- TW Telecom - of the larger public metro operators, TW Telecom (NASDAQ:TWTC, news, filings) makes the most sense, as Intellifiber's assets would fill quite a few holes in their national footprint - which amazingly does not include Philadelphia. However, the assets tend to be aimed at wholesale rather than enterprise customers, and therefore they would need to be reoriented somewhat.
- PAETEC - I was skeptical of this idea at first. But PAETEC (news, filings) has been showing more interest in fiber lately, and the Intellifiber model with 400+ central offices on-net seems like their kind of asset. It's possible, but perhaps not probable.
Less likely, in my opinion:
- Level 3, Global Crossing, XO, Cogent, Qwest - None are likely to be buying this kind of asset right now.
- Lightower - The fit is pretty good, but they are probably too busy with Veroxity at the moment.
- Other smaller private companies: AFS, Fiberlight, etc - none seem large enough to pull it off.
Of course, just because Intellifiber is soliciting offers doesn't mean a deal is guaranteed or even likely. The multiples being bandied about for fiber assets like these are quite high, and they could just be exploring the possibility, i.e. finding out just what the market price for these assets now is, not to mention which buyers might show up.
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