Last month we polled Ramblings readers, asking who the most likely buyers and sellers were in the US networking business. With the votes in, let’s quickly review what folks are thinking.
For buyers, there were few surprises. Zayo pretty much lapped the field for the obvious reasons of inclination and historical activity. Level 3, Windstream, and CenturyLink were bunched closely together in the next group. Comcast, which has already actually made a deal for TWC and hence a bunch of fiber, was in the third group with Lightower and tw telecom. It’s hard to disagree completely with that list, although in terms of raw likelihood of a deal of any size I think that the upstart Birch is perhaps more likely to follow through than some of the others. I also think that while Level 3 could still do a deal in Europe, they are pretty unlikely to make a move in the US. I also think that tw telecom’s likelihood of doing a deal this year went down substantially when they started that big dark fiber expansion with Zayo’s help.
For acquirees, I was amazed to see how many folks think XO will finally get sold this year. Yes, they’re at or near the top of the poll every year, but after making no moves at all for so many years and with little news from the company in either direction one would think the attention would move on. On the other hand, the fact that Icahn probably *should* sell it to someone who knows what to do with the assets hasn’t changed at all. While tw telecom held down second place, I still find it unlikely this year. Integra and FiberLight do seem likely to get some attention IMHO though. But I think Cbeyond really ought to be up there with them.
One can piece together a few potential deals that are dominating the thinking by looking at both sections and thinking back to the rumors. CenturyLink/tw telecom still seems to be on people’s minds, or at least I can’t think of too many likely fiber targets for the former or buyers for the latter. Windstream/Integra seems to be a natural asset fit that is just waiting for a price that would work. Zayo is omnivorous, but FiberLight and Fibertech would both fit well with their dark fiber appetite and not so much with others at the top of the likely buyers list.
But who do readers think would be out there to buy XO at the moment? No really, who? I know I made a New Years’ prediction that Icahn would do it this year now that nobody is looking, but many do seem to still be looking I’m having second thoughts when considering the other side of the table.
While I used to put tw telecom in that role, if it were going to happen it probably would have already and like I said they’re busy with a major organic buildout.
Level 3? Sure they’d love to get their intercity dark fiber back, but they seem focused in Europe if anywhere at all for M&A.
Zayo is said to have once bid for XO, but it was a long time ago now and the fit with their assets and customers today is less compelling. Plus, they too seem to have an eye firmly on European consolidation now.
If CenturyLink does move it will be for tw telecom and probably not XO, although I suppose one never can tell.
Ok, Windstream maybe, but I still have difficulty thinking of a multiple that would make both sides happy.
A cable operator with national aspirations? Comcast and TWC are a bit busy right now, which leaves Charter and Cox – and I find either unlikely. An international operator? Hard to find one that wouldn’t flinch at the smaller enterprise customer list.
I suppose some private equity firm ready to roll up its sleeves could take XO off of Icahn’s hands and use it as a consolidation platform. But again, if it were going to happen then a few years ago would have been a better time perhaps.
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In Europe surely it’s Zayo + eu networks