Telecom Ramblings

Better late than never?  British Telecom (NYSE:BT, news, filings) is apparently planning to enter the content delivery business, according to a report from Dan Rayburn.   But they aren’t going to buy their way in like Level 3 did, nor will they resell the services of other CDNs (Reliance Globalcom, Global Crossing, DT), nor will they straddle the fence with partnerships (Tata, Verizon).  Nope, BT is going to follow in the footsteps of AT&T (NYSE:T, news, filings) and build their own CDN offering from scratch. [Read more →]

Covad continues to transform itself into a national network operater, seeking to transcend its DSL and T-1 roots.  Today the company announced completion of a series of capacity upgrades and a nationwide MPLS deployment.  I have always watched Covad but never understood it well.  When the company sold out to private equity a year or so ago they mostly dropped off my radar screen.  Their new owners obviously needed to find a new direction for the company, and they are apparently ready to show off their new look. [Read more →]

Competitive telecommunications provider Cavalier Telephone unveiled its new, independently run Intellifiber Networks unit today, to be headed by industry veteran Clint Heiden.  The company debuts with more than 16,000 route miles of fiber, 400+ PoPs, and 700+ on-net buildings, mostly within an area bounded by Chicago, Boston, and Raleigh and concentrated in the mid-Atlantic states.  Cavtel has generally focused on the consumer segment and on enterprises in its main turf, the new move is intended to find a way to generate better value out of their fiber assets.  Of course, these are not new assets.
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An article from Phone+ Magazine over the weekend heralds a big change in the way Level 3 Communications (NYSE:LVLT, news, filings) sees itself.   The company is not only looking to increase sales via the indirect channels, it is looking to do so off-net.  For over a decade now, Level 3 has beat the drum about on-net services, driving higher margins by seeking sales that can be served mostly over their own facilities.  Now they are looking to embrace their inner CLEC, as it were, and compete for the mid-sized enterprise market via other [Read more →]

Reading the news these days is not unlike being hounded by the four horsemen of the apocalypse. Rather than being named Pestilence, War, Famine, and Death, this time they are named Depression, Nationalization, Foreclosure, and Bankruptcy. From the point of view of telecom and internet infrastructure, the whole thing is a bit surreal because for the sector there just hasn’t been much pain so far.  Sales may be wobbly in some corners and capex may be slowing, and a few companies with large existing problems may have succumbed, but with the telecom nuclear winter of 5-9 years ago still fresh in our minds this is like snow flurry so far.    This can’t continue forever, something has to give. [Read more →]

Hello everyone. I backed up the truck so to speak at .72 cents on Level 3 Communications (NYSE:LVLT, news, filings) equity on Friday so I thought I would take a minute to update a few spreadsheets and get my vision of the future out there for discussion.

First I did a quick and dirty ev/ebitdas calculation based on what I think is market price on the equity and debt which came out under 5. I’ve also included the calculation assuming face value of the debt, which came out under 7. I wanted an entry point under these numbers. Here’s that spreadsheet. I posted something close to this on the IV board however after going back through the 2009 numbers I’m a bit more [Read more →]

European alternative fiber operator Colt Group (LON:COLT, news) reported Q4 and full year 2008 earnings today.  Total revenue increased to €427.5M from €420.7M in the third quarter.  Overall in 2008 on a constant currency basis revenues increased 2.4%, the company has been driving data revenues while churning off voice revenues for several years now.  Data revenues in Q4 rose to 55% of the total.  It remains unclear just how long the company will run in place in terms of total revenue, but the economy surely won’t help. [Read more →]

Webhosting specialist Rackspace Hosting (NYSE:RAX, news, filings) announced solid Q4 and full year 2008 earnings today. Revenues of $143.1M were up 3% sequentially despite being affected by negative foreign exchange swings in the UK and Europe where about one fourth of their revenues derive. Overall, revenues for 2008 grew at a 46.9% clip, an enviable number by any measure let alone during a recession. Costs fell across the board, resulting in a profit of $0.06/share, well above estimates. [Read more →]

Sprint Nextel (NYSE:S, news, filings) reported earnings today and continued to excel – at redefining the word ‘gruesome’.  Fortunately, I think the street was expecting the new definition.  Revenues were $8.430B, down another 4.3% from $8.816B in Q3 and a bit more than the street expected.  For many quarters now the company has lost revenue rapidly, yet managed to generally maintain its cost of revenue – it’s just not a good combination.   The adjusted loss per share of $(0.01) was actually a bit better than the $(0.03) the street was expecting.  The company continued to generate positive cash flow at a reasonable clip, however, adding $536M during the quarter, and expects to [Read more →]

Metro fiber specialist Fiberlight offered an update yesterday on its progress building a new metro ring in northern Virginia.  The ring, which will connect the new NAP of the Capital region facilities that Terremark (news, filings) [a subsidiary of Verizon (NYSE:VZ, news, filings)] is building in Culpeper, is 50% done and on-target for completion in the spring as planned.  It’s nice to see that while the financial world may have ground to a halt and the pundits think the end is nigh on a daily basis, the world does keep on turning.  [Read more →]

According to an intriguing Data Center Knowledge article today, the credit crisis is having a somewhat surprising effect in the market for data center square footage: increased leasing activity and shortened decision times.  That’s right, less available cash for IT projects, yet more spending.  One might even call it hoarding.  Well, not on all things, just on space. What’s going on?  It seems to be an object lesson in what happens when a red-hot industry [Read more →]

Colocation specialist sdxc reported earnings after the bell, facing down the economy without a flinch.  They finished the year with 25% revenue growth and 33% EBITDA growth despite the economic turmoil and they did not revise 2009 guidance.  There can be no doubt that the datacenter space will feel the effects of the economy, but if a recession like this one merely causes your growth to pull back from 25% to 21-22% then you are doing pretty darn [Read more →]

According to several reports, the entire internet became unstable last night for about an hour.  Ordinary denizens of the web noticed somewhat, but it really got the attention of network operators.  Renesys has an excellent description of what happened which I found both entertaining and explanatory, but here is the quick version.

A small ISP in the Czech republic called SuproNet made a small, somewhat silly change to the configuration of its routers, which then propagated the change to its neighbors.  Routers being routers, they did one of two things:  [Read more →]

International network and IP services company glbc reported earnings overnight, meeting all the guidance they had previously given. However, as with Level 3 Communications (NYSE:LVLT, news, filings) last week, the financial crisis left its mark with foreign exchange adjustments large enough to make everything really hard to read. Full year guidance for both revenue and EBITDA appeared trivial to reach based on strong performance in the first three quarters. Indeed they made it, but because of the turbulence [Read more →]

Last week Telecom Ramblings broke the news here that metro and regional fiber specialist Zayo Group (news, filings) had apparently managed to raise yet more money, and in fact they did with a series B equity round.  We don’t get too many scoops around here, so far anyway!  Of course, Zayo didn’t actually tell us how much they raised yet, more information is to come later.  But let’s make a guesstimate of $50M based on CEO Dan Caruso’s comment: [Read more →]

In their Q4 earnings conference call last week, q announced that they will deploy metro fiber rings in six new markets outside their home region, hoping to “improve their out-of-region cost structure and competitive position.”  No kidding, Qwest has always lacked sufficient on/off ramps outside its home turf, it was a strategic mistake that originated back in the bubble that has weighed on the non-RBOC part of the company ever since. Qwest says the move is “a little bit of offense, and a little bit of defense”. [Read more →]

It’s annual report card time for me, so here are a few thoughts re Q408 as well a look at full year numbers versus my expectations. Q109 and FY09 model update will come later (although I did say that I thought 1050 to 1150 was a good conservative ebitdas range for FY09 prior to the Q408 con-call, so I think I’m starting off in relatively the right place). [Read more →]

Cable MSO Charter Communications (NASDAQ:CHTR, news, filings) finally cried uncle yesterday, coming to an agreement with its debt holders to restructure its debt load through a prepackaged bankruptcy. The company’s future had been looking quite dim lately, at least for common shareholders, due to the frozen credit markets and Charter’s coming debt maturities.

In the agreed upon deal which involves a Chapter 11 bankruptcy filing by April, [Read more →]

It’s been a busy earnings week.  Yesterday datacenter specialist Equinix (NASDAQ:EQIX, news, filings) reported earnings, with fourth quarter revenues of $190.7M inline with guidance and adjusted EBITDA of $84.1M which was a little better than guidance.  Diluted net income per share of $2.74 was inline with expectations.  However, the company reduced its revenue projections slightly for 2009, to $855M-875M from their original projection or $870M-892M in October.  This still represents 23% growth during a [Read more →]

Tata Communications (news, filings), the telecom arm of the Indian conglomerate Tata Group,  announced today a $430 investment plan in the Asia-Pacific region.  The plans two key features are a new ‘flagship’ datacenter in Singapore called the Tata Communications Exchange, and further development of its TGN-Intra-Asia undersea cable system, hooking up Singapore, Hong Kong, Japan and also Vietnam and the Phillipines.  Tata’s TGN cable systems began [Read more →]

Colocation facility specialist Dupont Fabros Technology (NYSE:DFT, news, filings) managed to find a crack in the credit markets this week, raising a total of $180M. That was enough to pay off a $135.1M construction loan, clearing up near term balance sheet issues. This will allow them to restart the development of their ACC5 facility in Ashburn VA, completion is now anticipated in the third quarter.  Construction remains halted at its Piscataway NJ and Santa Clara CA sites I suppose, but it’s the first step back to [Read more →]

Telecommunications carrier Level 3 Communications (NYSE:LVLT, news, filings) reported earnings this morning, with mixed results.  They reported a profit of $0.03, something that doesn’t happen every day, but of course this was mostly due to one time benefits.  The fingerprint of the recession was clear  however, the company’s revenues were hit by unfavorable foreign currency exchange by $14M over the third quarter.  That’s enough to raise some eyebrows, currency fluctuations are something my models do not handle yet so this did catch me off guard, although in hindsight the troubles in the UK were clear enough.  EBITDA, when adjusted for all the one time items, was $271M.  My projection of $260 included a $12M charge for severance, it would have been $272 otherwise and was actually very close.  The positive free cash flow of $124M was [Read more →]

According to a reliable source from within metro and regional fiber operator Zayo Group , the company has again defied the credit crisis and raised a significant amount of new capital.  This is the second time the company has raised money during the teeth of the recession, they added 35M at the end of September apparently as a cushion for the impending recession.  Any money raised now is surely expensive money, valuations are very low and available interest rates for corporate debt are high even for large profitable companies.  Supposedly, the money is not slated for day to day operations, their balance sheet is in good shape.  That of course raises the question:  then what is it for? [Read more →]