Cogent Buy’s T-Mobile’s Wireline Biz for $1

September 8th, 2022 by · 7 Comments

While it hasn’t dipped its toes into the M&A world for a while, Cogent Communications does like a good deal. And they appear to have found a big one one, pending what has to be a pretty hairy integration project.  The backbone operator has entered into a definitive agreement to acquire T-Mobile’s wireline business for one dollar.

Of course, T-Mobile is a wireless company, so it may come as a surprise that they have something like this to sell. But what we’re talking about here is what’s left of the legacy Sprint longhaul network, which T-Mobile acquired in the deal for Sprint’s wireless biz a few years ago.  You know, the fiber and data network with origins in the 80s which still has some unique, albeit well worn, fiber routes and did $739M in revenue in 2020.  Cogent will use those assets to expand its own product set beyond the IP layer into wavelengths and other products, all the while moving to consolidate all that data revenue onto its own IP backbone.  

As part of the deal, T-Mobile will become a big customer of Cogent. That deal will cover IP transit for 4.5 years after closing. The arrangement will involve $350M in payments to Cogent over the first 12 months followed by a similar amount over the following 42 months. It’s not going to happen right away though, since due to regulatory approvals and such they expect to close the deal in the second half of 2023.

This was an asset I always thought would get bought someday, but had basically forgotten about. The fact that it sold for $1 indicates that it certainly loses money hand over fist, and Cogent faces a significant integration task. But there is certainly the opportunity for a pot of gold at the end of that rainbow.   For its part, T-Mobile will take a $1B charge to close things out.

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Categories: Fiber Networks · Internet Backbones · Mergers and Acquisitions

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7 Comments So Far

  • Marmot says:

    T mobile is taking the $1b charge not Cogent. According to Reuters: “T-Mobile said it expected to record a pre-tax charge of about $1 billion in the third quarter of 2022, to cover for the carrying value of the wireline business and a liability for the contractual payments of the transaction.” Given the contract payments are for $700m, I guess the business was only valued at $300m on their books.

  • Chris A. says:

    That´s an exciting deal. I would have guessed that T-Mobile could use the Sprint fiber network for the backhaul of the own mobile network and for new fiber services for business customers. But T-Mobile seemed to be interested only in the wireless part of Sprint.

    Sprint used to be one of the important long-distance carriers in the US (like AT&T or MCI). What happend to this part of the Sprint wireline business? Was it phased out (when?) and do “carrier access codes” and “dial-around codes” for long-distance calling still play any role in the US? Did Sprint wireline even have any private customers in the last years?

    Apparently, Sprint wireline has “own” fiber – but what does this exactly mean? Is it “self-laid” fiber instead of fiber IRUs (which sometimes is also seen as a kind of “own” fiber)? Is this “owned” network based on the rights of way of the railway communication network which was the origin of Sprint? Or did Sprint also invest into fiber projects on “non-railway-routes” in the last decades?

    An important part of today’s Cogent network is probably still based on the old contracts concluded with the former Wiltel about 20 years ago? I suppose that these contracts could be replaced with the Sprint network in the future?

    Who is actually the current fiber supplier for the network of T-Moble US? They seemed not to use Sprint? I suppose that they use dark fiber IRUs from the “usual suspects” like Lumen (Level3 / Global Crossing), Zayo, etc.?

    • Rob T says:

      Zayo owns much of the metro and long haul fiber used by Cogent, so I’m guessing a lot of the long haul and metro rights of way and fiber still owned by Sprint’s local telco business could be a huge benefit for Cogent in the future once some of those IRU’s expire.

      • Anonymous says:

        Sprint does not own any local telcos. Those businesses formerly known as Carolina Telephone, United Tel, and Centel were spun off as Embarq in 2006.

        Embarq was then purchased in 2008 by CenturyTel (later CenturyLink, now Lumen)

        And now most of those former Sprint local telco markets will be sold to Brightspeed during the 4th quarter.

    • mhammett says:

      Owned fiber usually means you own the underlying asset, not an IRU on someone else’s asset. Sprint would have constructed this along (mostly) railroad ROWs.

      I’m not sure why T-Mo wouldn’t value having that asset, but Cogent will reap the rewards of moving off of someone else’s IRUs, someone that’s usually hostile (Lumen).

      • Rob Powell says:

        Some of that owned fiber is 40 years old, and some of it is even direct-buried. If anyone can find the value in that sort of asset, it’s Cogent. But there are definitely limits to what can be done with it. Meanwhile, Cogent has always seemed pretty comfortable sitting within that competitor/customer overlap when it comes to Lumen and others.

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