Last week, RCN Metro was reborn as Sidera Networks following ABRY Partners’ acquisition of RCN and separation of the business. Since that deal was announced, I have wondered just what ABRY had in mind for these assets. Did they want to operate it or sell it? Would they focus its expansion on organic growth or turn it into an acquisition platform? Here today to supply us with more detail on Sidera’s plans going forward is the company’s newly minted CEO Mike Sicoli, who formerly held the CFO position at RCN:
TR: Why did ABRY choose to separate the metro fiber and cable businesses?
MS: The philosophy behind separating the assets was to make sure each business could realize its full potential unconstrained by what may be happening with the other side. We had several examples in the few years leading up to the sale where growth opportunities for RCN Metro couldn’t get funded because of the capital intensive nature of the cable business or the short term desires of the street. Being private and separate really unlocks those constraints and enables us to pursue growth opportunities as they arise.
TR: How difficult was the separation? Is there much work to be done yet on that front?
MS: The businesses were run largely separately before, and the network was largely separate. The integration had taken place at the backoffice level. There is a shared service agreement that takes us into the next year. We will gradually migrate to standalone functions over the next year.
TR: To what extent is RCN still a customer of Sidera and vice versa?
MS: We are each important customers to each other. They are a customer of ours for certain dark fiber routes and certain lit services. And likewise we are a big customer of theirs, using their fiber in certain markets: Chicago, DC, parts of Boston. The relationship is more formal today than before – documented with arms length agreements and such. But the cooperation at the field level will, we assume, continue.
TR: As you mentioned, RCN Metro seemed to be rather conservatively managed while part of RCN. As an independent force, where will Sidera be expanding its efforts? An expanded capex budget? New markets? Greater depth in existing markets?
MS: Really, all of the above. But priority A for me is becoming more ubiquitous in the markets we already serve. Behind that would be getting into additional markets adjacent to the current footprint. If you think about the current footprint as DC to Boston and out to Chicago. There is a lot out between those dots that we don’t serve today that would really be hungry for the products and services we sell and the capabilities we have. Then there’s the ability to take on larger projects. We had been forced into doing projects of really no more than $5M in capex. It took many projects off the table that have big long term return and growth opportunities associated with them. That’s what I’m most excited about: the ability to pursue larger projects, take a financial return type of view, and get them funded above and beyond the baseline business plan.
TR: What stance does Sidera begin with respect to the M&A environment? Are you focused more on organic or inorganic growth?
MS: M&A opportunities are definitely on the table. ABRY very much views the Sidera platform as one to drive consolidation. We are a product of some of that already, the biggest pieces of Sidera came from ConEd Communications and Neon Communications. It’s definitely a mix of organic and inorganic. I’m not sure one would have more focus than the other, I really think they have equal potential. Obviously you have more control over the timing and magnitude of the organic piece.
TR: Traditionally, RCN Metro focused on wholesale and large, bandwidth intensive enterprises. What new markets do you see the greatest potential in?
MS: On the enterprise side, I think we have a lot of potential outside of financial services which has been our historical focus. That’s not to say we don’t have additional potential in financial services, we absolutely do. But we have really focused on financial services almost to the exclusion of other verticals. When you look at healthcare, education, media, government, etc., I think we have the potential to have the same kind of penetration and success as we do in financial services. We just need to invest to make that happen: capital to put more locations on net, sales resources to sell it, backoffice resources for the installs and customer services.
TR: Does Sidera see opportunity in targeting small and mid-sized enterprises as well?
MS: Going downmarket and targeting smaller customers is probably not at the top of the list. There’s so much opportunity to serve additional larger customers who tend to be more sophisticated and tend to want the products and services we offer and are willing to pay a premium for them – I think that’s the best place to go.
TR: How about tower backhaul?
MS: Historically we have not done much fiber to the tower. We do a lot of business with wireless carriers but on traffic aggregation side, and the five national wireless providers are among our top 10 customers. There’s a lot of business to be done without the tower piece and we’ve addressed that market successfully. We’re taking an opportunistic approach to the fiber to the tower opportunities. We will continue to look at them and if they make sense, we will be happy to pursue them. But we don’t view it or any investment as a loss leader type of opportunity.
TR: Thank you for talking with Telecom Ramblings!
If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!Categories: Industry Spotlight · Metro fiber
Discuss this Post