EarthLink Adds Some Bandwidth Muscle

October 17th, 2011 by · 4 Comments

Over the past year, Earthlink (NASDAQ:ELNK, news, filings) has been buying up CLEC network assets to go with the former New Edge business, to the extent that business services now make up 75% of the company’s revenues. Last fall it was Deltacom, then over the winter they tacked on One Communications, and then added a few smaller pieces like STS Telecom and Business Vitals.  Put altogether, they’ve got some substantial infrastructure in place, and today they announced the addition of some bandwidth muscle to that skeleton.

The expansion includes adding new 10GE OC-192 fiber rings, deploying additional high speed access points for private VoIP traffic, multiplying its IP/MPLS capacity 16-fold, expanding its EVDO wireless coverage, and bringing three of its own data centers on-net. The majority of the work will be done by the end of the year, with the rest to follow in the first quarter.

What this represents is a new stage in the integration of the company’s acquisitions, simultaneously improving the cost structure while gearing up to go after new revenues. The fact that they are not changing capex guidance reflects the fact that this was always part of the plan. Of course, it had to be – Earthlink couldn’t have made the purchase if it didn’t think it could do better with the assets than the previous owners had been, and it will take investment to make that happen.  Good thing that access business is still throwing off so much cash!

I still think Earthlink is hungry for more CLEC assets, and they will probably make another purchase this winter. My best guess is that it will be Broadview, which has been for sale for some time now and would fit well with the One assets. EarthLink is rumored to have made a play for PAETEC during that company’s negotiations with Windstream, which would have been a transformational deal of course. But unless they pull a rabbit out of their hat shortly on that front, surely they will have moved on to more willing targets.

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Categories: CLEC · Mergers and Acquisitions

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4 Comments So Far

  • Anonymous says:

    In the non reality world in which I think

    Earthlink purchase sidera for a Northeast network to compliment the Southeastern assets. Then moves to Integra for Northwestern network. Followed by Telepacific for the Southwestern.

    Or they use there dry powder to purchase XO.

  • zoo says:

    They could make a play for Integra Telecom. Rumors are they are for sale.

    • Rob Powell says:

      That would be a good fit, yes.

      • Crossy says:

        Well, ELNK CEO Rolla P. Huff should know Telepacific a tad better than many others as he did a great job years ago selling Western U.S. CLEC Mpower Inc. to Telepacific after steering the company through Chapter 11 proceeding. For shareholders who bought in post BK, it was a 5-bagger or better back then


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