National fiber operator and CLEC XO Holdings (news, filings) this morning announced an expansion of its metro presence in the Los Angeles metropolitan area. They have had substantial network in the area for some time of course, but will now be adding additional PoPs in the area and extending their reach into the northern suburbs of Burbank, Glendale and Pasadena as well. This is the second time in a year that XO has put money into the LA market - last November they built out into the area known as the inland empire, which includes San Bernadino and Riverside.
XO has of late been spending more of its resources on expanding and developing its fiber assets and less on spectrum, copper, and the rest. In July they announced a similar expansion in Seattle, earlier this year they put money into Texas, and in the prior two years they expanded into Charlotte and Raleigh. That's a good thing, and if they keep it up they just might bring those margins up to par with their peers someday.
The question hanging in the air though is just when and how they will raise money to fund the capex that projects like this require. The expansions will peter out quickly if cash flows continue to drop further below $100M. Will they break down and raise some straight debt? Seems like the sensible move right now unless Icahn intends to make another offer.
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