A year and a half ago, Zayo announced plans to build a new, diverse intercity fiber route between Salt Lake City and Saramento. Yesterday they revealed how things have gone so far, and apparently they’ve gone pretty well.
We’ve seen intercity fiber builds getting underway over the last 2-3 years around the country after a decade of nothing following the dot com crash. But this year, the hopeful air was perhaps a bit soured by the trip through bankruptcy of the Allied Fiber southeastern assets just one year after completion.
But Zayo’s experience has been on the other side of the fence. In the three quarters or so since they completed the Sacramento-Salt Lake City route and delivered dark fiber to their anchor tenant, the route has generated a dozen more follow-on sales. Three more of those were for more dark fiber, with the other nine at the wavelength level. The company now pegs the cash flow yield at around 29%.
That may bode well for Zayo’s other intercity buildout projects announced in recent years, which include routes between Dallas and Omaha, Dallas and Phoenix, and Atlanta and Washington DC. However, perhaps it’s best to consider the success of those on a route by route basis, just as Zayo found justification to build them in the first place.
Despite all the consolidation Zayo has done over the years, a national dark fiber intercity footprint was never one of the targets. They got pieces of one, but what few probably expected back in 2007-2008 (including me) was that they’d actually eventually build out the rest of the puzzle and make money doing it.
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