Zayo Closes 360Networks Deal, Goes Transcontinental

December 2nd, 2011 by · 13 Comments

Zayo Group (news, filings) never wastes time closing acquisitions, so it came as no surprise to me that the company announced this morning that its purchase of 360Networks is already a done deal. The combined company has an annualized run rate of $393M, with 360Networks' wholesale voice business being spun off into Onvoy of course.

The deal substantially boosts Zayo's position in the sector, now boasting 44,000 route miles and nearly 2 million fiber miles and extending from coast to coast at last. 360Network's western longhaul network connects formerly isolated Zayo metro markets, while its limited metro footprint is highly complementary - adding depth in markets like Denver and Seattle while providing a starter set in others of the type that Zayo has proven its expertise at exploiting.

Next up will of course be the integration process, which is something Zayo handles like nobody else in the sector. The company says some parts of that process will be done in days, others in weeks - none of this 12-18 months stuff. After 18 acquisitions so far in their roll up, they certainly have the track record to back that up - although this deal is clearly the biggest integration job they have taken on so far. In an SEC filing back in October, the company said it expected to derive annualized synergies of $15.8M from the deal.

 

Of course, there will be some layoffs as part of the process - such things are inevitable in M&A in the fiber and telecom space. But my impression of this deal is that it is more about how much more the two companies can do together than about how many fewer people they can do the same stuff with. 360Networks had a real pile of fiber assets, but insufficient scale to really invest in them.

While Zayo is now fully transcontinental, there are still a few corners of the map they have not yet penetrated. Yet they are obviously moving to do so - actually their latest network map shows fiber into New England and up to Albany which they must have acquired quietly somewhere recently. The biggest gaps right now in their national coverage are Florida as a whole and southeastern intercity fiber in general. I'll bet that if a Florida fiber asset hits the market in 2012, Zayo's dorsal fin will be circling it almost immediately.

 

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Categories: Mergers and Acquisitions · Metro fiber

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13 Comments So Far


  • Carlk says:

    Rob, what’s the difference between 2 million fiber miles, and 165,000 fiber ‘route’ miles?

    This is not a trick question but it may dovetail with your remark below as well as your sentiment which I agree with even though the size of the swallowing in the form of revenues is mammoth comparatively; not to mention the geographies which are hardly local, nor domestic exclusively.

    Did you miss any data in your contact section recently?

  • Carlk says:

    “none of this 12-18 months stuff.” Watsa, etal have placed these people on a slow burn, and they don’t care how long it takes as far as I gleaned from a conference call in FL today. The good news for employees of this slow burn entity is that, attrition is the current MO for relieving them of their duties rather than rapid removal of said bodies adding, in some cases, unnecessarily to bloated payrolls.

  • Carlk says:

    Can you quantify LVLT’s ‘fiber miles’ globally?

  • Carlk says:

    I gave you the new combined route miles at 165K including 100K intercity, 30K metro, and 35K sub sea.

    How many fibers to each route mile? Rob, do you have this answer?

    This is starting to look like Jim Crowe telling his Bankster friends that they need to come up with a new metric which he was going to soon supply, but nobody asked Robin this morning, regarding aggregate sq. feet serving enterprise customers as opposed to # of buildings being emphasized by the likes of Cogent and Time Warner Telecom in the marketplace.

    One can see how there would be economies of scale in looking at aggregate sq. ft. vs. # of buildings with direct respect to revenues and expenses.

    • Rob Powell says:

      Carlk, I don’t have an average fiber/cable number for Level 3 handy, I will look. However, I will save you the trouble and say that their total fiber miles is still much larger than that of Zayo – as are their revenue, ebitda, capex, debt, and lots of other things! 🙂

      Actually, maybe I’ll put together a table of fiber miles for those companies who will give it out – just to put them all in one place.

  • Carlk says:

    Thank you Rob. With Robin Grey telling my Barking Dog banker lady, Ana Goshko, that Enterprise Customer revenues now exceeding Wholesale revenues–a most meaningful metric not to be dismissed–Jim Crowe better supply “Mr. Manipulator”with that stat on aggregate sq. footage serving enterprises vs. # of buildings ASAP, not in February, 2012, as well!

    He steps up the plate next week, right? 🙂

  • Brian Scully says:

    Rob, I know the Wiltel owned portion was short of 20k route miles with an average count of 96. I believe these routes are primarily where their planned reduction of miles is coming from due to redundancy.

    The Zayo avg count is still pretty low. Their large bundles came from AGL and AFS. How much of the Zayo system is IRU and not owned fiber?

  • Carlk says:

    There’s Big Jim now. He is presenting on a DAY that historically lives in infamy!

    I think his dad was one of the brave men who stormed the beaches of Normandy, a decorated war hero, so let’s hope Jim “Brings it On!” to his competitors that have at least up until now, been able to dismiss his NETWORK as uneventful or too far ahead of its time to be useful.

    I would like to hear about the sq. footage metric for delivering enterprise services to customers vs. # of buildings he was telling THE GOLD MEN about in NY a couple of months ago!

    http://www.marketwatch.com/story/level-3-to-present-at-39th-annual-ubs-global-media-and-communications-conference-2011-12-05

  • Les g says:

    Did zayo close the small 360 office in missoula, mt?

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