Telecom Ramblings

It does seem now that winter was the low point for market valuations of fiber based competitive telecoms in this cycle, because since then there has been a steady upward trend.  Part of that has come in the debt markets, where bond prices have in most cases moved closer to par.  For instance, back in December, Level 3 bought back a pile ($173M) of its 6% convertibles due 2010 at just 70 cents on the dollar, they now trade in the mid 90s.  But common stock has also done well across the sector despite the incessant drumbeat of negative news coverage.  Here is a graph with my latest EV/EBITDA calculations for a cross section of the industry: [Read more →]

Data Center Knowledge had an excellent article yesterday about the looming shortage in colocation space, I recommend a read.   The frozen credit markets forced many projects to be canceled or delayed over the winter, and only a few have restarted.  The trouble areas seem to be Santa Clara and Northern Virginia, which have vast existing colo footprints but even greater demand.  Given the long lead time for new facilities, a shortage seems inevitable at this point. [Read more →]

Two months ago, Zayo raised $128M with the stated intention of spending it on M&A.  Today, they made good on that promise with the announcement that they will be buying ftgx.    The price will be $11.45/share, for a total purchase price of a bit over $90M including net debt of $5M.  It’s not quite a done deal, Fibernet has a couple weeks to solicit a higher offer.  However, if the transaction goes through, Zayo will [Read more →]

SGI has deployed one of its modular datacenters, branded the ICE Cube, at i/o Data Center’s new Phoenix ONE facility.   i/o has been moving quickly on the huge 530,000 square foot facility, lining up connectivity from  AGL Networks and Qwest and raised flooring from Tate.   One of the last to raise money as the financial industry imploded, they are clearly hoping to capitalize on the slowdown in construction by getting their new space online.  It seems a bit early though for a functional ICE Cube though, I didn’t think the facility would be on line yet.  But I guess since these things can be outside, all they need is [Read more →]

With its acquisition by private equity now complete, Tinet now begins a new life on independent footing.  Rising out of the ashes of the Tiscali empire, their business plan starts out in the wholesale IP/MPLS market.  Of all the top backbones, only Tiscali is a pure play.  Cogent comes the closest to a parallel, but even then half their business is in enterprise metro access.  [Read more →]

Terremark (news, filings) [a subsidiary of Verizon (NYSE:VZ, news, filings)] reported its fiscal Q4 earnings today.  Revenues of $68.9M were lower than expected, but EBITDA of $22.1M and earnings per share of $0.06 were quite good.  Overall, a familiar story of slower growth due to the recession but with cost containment more than keeping pace.  For fiscal 2010 the company offered guidance that reflects the economic slowdown, projecting revenues of $290-300M (which would be 18% growth) and adjusted EBITDA of $80-85M.  In other words, still growing nicely, just not as quickly as last year. [Read more →]

Taking its CDN business into eastern Europe, Level 3 Communications (NYSE:LVLT, news, filings), announced a deal with Czech-based Internet Billboard.  Level 3 will provide caching, download, and traffic management througout the region, including the Czech Republic, Poland, Romania, Slovakia and Russia. The new capabilities will help Internet Billboard to centralize and streamline its ad delivery capabilities.  [Read more →]

In late March, news began to dribble out that the transpacific cable PC-1 was for sale, and the two bidders were apparently the Japanese telecom giant NTT Communications (NYSE:NTT, news, filings) and privately held Pacnet.  At the time, I put my money on NTT and if this were Vegas I would have won.  Today NTT announced that it has entered into a contract to buy the cable from its private equity owners.   Of course, it wasn’t exactly a longshot bet.  NTT was by far the most logical place for the PC-1 to end up, in fact I’m surprised they didn’t acquire it sooner. [Read more →]

LightReading had a wonderful article late last week discussing what telecom carriers can learn from Amazon.  The topic is very relevant nowadays, as the industry struggles with net neutrality.  The owners of last mile fiber do not want to be dumb pipes, they want to make money off those bits by delivering services and don’t appreciate when others do so in competition to them.  They need all that content and can never produce it themselves, yet trying to control its usage threatens to start a war for public opinion that they likely cannot win whether the economics back them up or not.  So what to do? [Read more →]

Reuters reports that q isn’t going to get near the asking price for its longhaul network assets.  I doubt anyone is terribly surprised.  However the reports also say that bids will be incoming anyway, meaning that the game is apparently still afoot.  So, let’s forget the list price and consider this an auction, where the seller’s reserve price is not known.  How much is Qwest’s longhaul biz really worth? [Read more →]

Last week I posted a graph of EBITDA margin trends for a cross section of longhaul and metro fiber providers.  In the comments, fellow blogger Dave Rusin of Telecom Straight Shooter mentioned that a Gross Margin chart might also be interesting.  Now, I had been thinking about it, but while I was thinking, another reader who recently became a fellow blogger, Brian Scully of Silver Oak Advisors had already put it together and he very kindly passed it along: [Read more →]

Hibernia Atlantic raised $12M in senior secured debt financing last week, with the money coming in from BIA Digital Partners.  Now, $12M is not a ton, but the key is that this money seems to be opportunistic.  It’s not that Hibernia needs it, but that it has something it wants to do with it.  That the terms are favorable enough to make financing feasible right now may be a further sign that the credit markets continue to thaw at the edges.  [Read more →]

According to an SEC filing by PAETEC (news, filings), the company has settled with Sprint Nextel (NYSE:S, news, filings) over the latter’s patent infringement claims.  Patents again, ugh.  In this case, Sprint filed the lawsuit in January of 2008 along with similar claims against NuVox, Broadvox, and Big River.  This came just after making Vonage cry uncle and pay some $80M over the same 6 patents.  [Read more →]

Metro fiber specialist abvt and security/defense consultant QinetiQ have announced that they will work together to advance network based quantum cryptography.  Quantum cryptography relies on a principle of quantum physics which says that if you measure something you change it.  In terms of use in communications, the dream of quantum cryptography is that you can’t eavesdrop without being detected – via any method.  If you’re not a physicist, it’s obscure and counter-intuitive, and really cool (at least for me).  Add it to fiber networking, and what you have is the ability to build a link that is completely and totally secure. [Read more →]

Ed Gubbins of Telephony Unfiltered detailed some interesting remarks by Cogent Communications (NASDAQ:CCOI, news, filings) CEO Dave Schaeffer about Qwest’s longhaul network.  Basically, he said they looked at it but it is just too expensive.  My first reaction was along the lines of ‘Huh?’ because Cogent is just so much smaller that the very idea boggles the mind, even for Schaeffer who isn’t exactly known for playing down his importance in the world.  Cogent’s enterprise value is below $400M and they have $66M in cash, and Qwest’s asking price is supposedly $2-3B.  I happen to think that price tag is too high, but not by that much.  Why would they even take the call?  But as it turns out, I actually think there just might be a way it *could* happen. [Read more →]

In part 1 of this article, I gave my own impressions of NTT America.  For a more direct perspective, Telecom Ramblings talked to Chris Davis, Director of Marketing for NTT America.

TR: NTT America has long offered the more established CDN services such as caching and website acceleration, do you have any plans to offer services such as streaming or large object delivery?

CD: We have one of the only fully integrated IP networks with a robust CDN layered on top, which allows for full control of the network, to deliver high quality streaming.

We’ve deployed a number of new [Read more →]

NTT America, a subsidiary of Japanese telecommunications giant NTT Communications (NYSE:NTT, news, filings), operates what has to be the quietest Tier-1 internet backbone in the US.  NTT leases wavelengths and such as the foundation for its IP/MPLS network, and sells capacity and services at layer 2 and 3.  Their story has never really gotten as much press, perhaps partly because they don’t own fiber itself.  They are always out there pushing bits, but without the public drama of a Cogent, Level 3, or Sprint and without the raw size of an AT&T or Verizon – on this side of the Pacific anyway.  That’s part of it too of course, being the smaller arm of a foreign giant can tend to leave you in the shadows and when one thinks of NTT one thinks of fiber in the Japanese market and the mobile arm NTT Docomo first.  But nevertheless they push a whole lot of [Read more →]

In a signal that they expect a thaw in the credit markets, datacenter developer Digital Realty Trust (NYSE:DLR, news, filings) is buying more land.  The tract covers 34.2 acres and is adjacent to their other assets in Ashburn VA, and if fully developed it would add some 400K square feet in that market – roughly doubling their Ashburn footprint if I recall correctly.  Much of the space already being constructed in the region has already been spoken for, but brand new projects largely remain on hold with funding so [Read more →]

It’s always surreal to see clwr report earnings these days, if only because absolutely nobody cares what their results actually are.  There are only two positions.  Either Clearwire is underfunded and doomed to being crushed by AT&T (NYSE:T, news, filings) and Verizon (NYSE:VZ, news, filings), or we’re just a year or two away from the WiMAX revolution which will break the stranglehold those two have on the entire communications infrastructure.  Clearwire’s revenues of $62.1M and net loss of $0.37 per share remain basically irrelevant at this point.  The questions revolve around [Read more →]

For those who have a Kindle or might want one, Telecom Ramblings is now available in the Kindle Store.  Almost any blog can be on the Kindle now, Amazon has opened up the publishing platform.  The pricing for this (and almost every blog I guess) is chosen by Amazon, don’t ask me to change it because they didn’t ask me either.  There is a 14 day free trial though.   [Read more →]

In the comments to my Earnings: Metro Fiber Still Strong Despite Headwinds post there was some discussion about relative EBITDA margins.   EBITDA is one of the major metrics that people use for valuation in this sector (Bear on Business reminds us why).  Its ratio to revenue is called  EBITDA margin, of course, and because it is defined relatively similarly across the sector we can use it to contrast different companies.  So for the sake of fun, I’ve put together the following graph of adjusted EBITDA margins as reported by a cross section of the competitive fiber [Read more →]

This week, the French parliament has been working very hard, passing ground breaking anti-piracy legislation.  Or perhaps they’re just grandstanding while passing a really stupid law.  It sort of depends on your point of view.   It goes like this:  there will be a new government agency whose job it is to a) collect complaints about music and movie piracy from the industry, b) send out warning letters to the accused, and c) have the internet access cut off for anyone who gets a third letter.  Sounds like [Read more →]

AT&T (NYSE:T, news, filings) made a public offer to some 27,000 members of the CWA – about a quarter of those involved – calling it the carrier’s ‘last, best, final offer.’  The union did not exactly respond with glee, obviously, firing off an angry response.  This sounds to me like an escalation of hostilities.  It has been 6 weeks now since the last deadline passed yet talks continued.  It does not appear that all that much has been resolved since then, the two sides remain far apart on a host of issues.  So what next? [Read more →]