There has been a significant shift in focus over at Integra. The western network operator has pivoted the rest of the way towards fiber, splitting off Electric Lightwave as a standalone entity. Not only that, but the parent company is also taking on the Electric Lightwave name, with Integra living on as a subsidiary focused on the SME.
It's an acknowledgement that the fiber side of the business has been driving things for some time. The company relaunched the Electric Lightwave brand early in 2015, but had been shifting its investment toward its fiber network for several years before that. The new Electric Lightwave entity's revenue run rate in the first half of this year was $429M with EBITDA of $134M, while the Integra piece will have revenue of $192M and EBITDA of $58M. Integra will have the ILEC/CLEC infrastructure in Minnesota, North Dakota, and Colorado and will also serve SME customers across the Electric Lightwave network via a wholesale arrangement. Meanwhile, Electric Lightwave becomes a metro and regional longhaul pure play.
It's quite similar in some ways to what Lumos Networks is planning on the east coast. Mixed fiber/CLEC businesses haven't been getting the sort of respect that pure fiber companies have, which has limited their access to capital and made it more complicated to participate in M&A. By separating the two businesses, Integra's board clearly hopes to change that dynamic.
Whether all this will result in operational gains or enable M&A on either side of the table remains to be seen of course. However, I suspect the most likely scenario is for a strategic buyer to come in for one side or the other. Birch, for instance, might be a good buyer for the Integra side now, whereas they wouldn't have been for the combined company. And someone like Lightower could now see the Electric Lightwave assets as a means to go national that wasn't as clean as it was before now.
Marc Willency will be CEO of the Electric Lightwave side of things, which will retain 83% of the workforce. Brady Adams, the former CEO of Optic Access which Integra acquired last year, will take on leadership of the Integra division as SVP and general manager with the other 17% of the workforce. Bank Street Group advised the company on its separation.