Beyond Broadview: Other Targets for Icahn and XO

August 15th, 2012 by · 9 Comments

On Monday we learned that Carl Icahn made a bid for Broadview Networks, the northeastern CLEC with several hundred on-net buildings. The initial approach was rebuffed, although it could easily be followed up on. But if not, what other telecom assets might Icahn be interested in buying?

While long term it still seems like Icahn will sell XO, a short term purchase to help change reboot the narrative both internally and extenally. He’d be looking for something that wouldn’t cost him an arm and a leg and that would give XO either additional scale or a new dimension.  Here are a few thoughts:

  • FiberTower – This springs to mind quickly of course, because like Broadview they are restructuring through BK court, which is his favorite hunting ground. Of coruse, XO has the NextLink LMDS and microwave spectrum assets and the fixed wireless business itself, so it wouldn’t be a new concept for them. And XO’s Tier 1 metro fiber might help FiberTower’s margins. It still just seems unlikely, however.
  • Limelight – The opportunity to marry XO’s fiber assets with a CDN that is available for a song will surely have occurred to Icahn. The outright combination of cloud-based managed services with their concentric brand wouldn’t hurt either. After all, XO is already reselling Limelight’s CDN since May.
  • EarthLink – This would cost a bit more, but the market hasn’t been giving Earthlink much credit recently so Icahn might be able to offer a premium they can’t get elsewhere. XO’s extra fiber assets and enterprise customer base might fit well with Earthlink’s growing cloud focus and service reputation.
  • Cogent – Cogent has been trading at higher and higher multiples despite losing its largest customer two quarters ago and still getting its footing back. I can only assume there is takeover talk helping out here, and on paper it looks as if it might be quite complementary to XO if they could get past the culture clash. But for Icahn the valuation is probably too high.

This is not meant to be an exhaustive list. If you’d like me to ramble on about other possible targets Icahn might consider, just leave a comment and I’ll do my best.  Or if you’d just like to rip the above suggestions to metaphorical shreds, that’d be fine too.

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Categories: CLEC · Content Distribution · Internet Backbones · Mergers and Acquisitions

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9 Comments So Far

  • SC says:

    This is all overreaction. Just because Icahn is sniffing around at a company that HAPPENS to be in telecom…He’s getting ready to dump XO

  • Rob says:

    I disagree – XO would not have committed the capex to deploy 100G nation-wide just so Icahn can turn around and dump it. He’s either playing a longer game waiting for a huge payout, or he’s going to try and grow the business now that he has full control. Either way, some strategic acquisitions make sense.

    Rob – any thoughts on Sidera as an XO target, or do you think the cost would be too high for an asset like that?

    • Anonymous says:

      Looks like a whole bunch of “smart” money thinks owning fiber infrastructure is a good idea going forward, given the Sunlight blog post listing of firms with a stake in fiber.

    • Grant Lewis says:

      Given the remaining IRU terms on the fiber assets with terminal velocity decreasing enterprise valuation as XO doesn’t own the assets, the limited capacity on the existing network and the overall lack of interest from the market on acquiring XO given Carl Icahn is very difficult to negotiate with i suspect this is really an opportunity to create sum energy while making a surgical investment.

      • CoCo says:

        Heh, too true! Carl Icahn attached to the deal = instant devaluation of 5-10%, just because he is who he is. I wouldn’t want to have to deal with that @#$hole and his vastly inflated sense of self worth.

  • Brian Scully says:

    Is EarthLink a better target for Windstream?

  • Anonymous says:

    Who has the lowest EV/EBITDA multiple for the industry?

  • Anonymous says:

    Not that we have not seen this before but Sunit Patel and Jim Crowe of Level 3 have an awful lot of swagger lately. (Invetsor conference yesterday)They seem very confident in the generation of substantial free cash flow and with ability for investment into other items like Europe, South America and in my mind a very imminent purcahse of XO. XO for Level 3 may be a fast free cash flow generation MNA, synergies ,network integration will be relatively seemless as they are connected already. Maybe they woudl be dumb enough to take Icahn into there ownership structure, they have been in the past willing to take tough money ( 3 Amigos deal).

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