Rob Shanahan, CEO and president of Lightower Fiber Networks, isn't afraid of transitions. The 25-year telecom industry veteran is now leading the company through a merger with fellow competitive provider Sidera Networks. In late December, Berkshire Partners, a Boston-based investment firm, signed a deal to acquire Lightower Fiber Networks and Sidera Networks for $2 billion. Sean Buckley, Senior Editor of FierceTelecom, caught up with Shanahan to talk about the pending merger with Sidera and the value it will create for Lightower's customer base.
FierceTelecom: Rob, Berkshire Partners just signed a deal to merge Lightower with Sidera. What do you think is the main value of combining the two companies, which have complementary business models and networks?
Rob Shanahan: We're very excited about it. They are two companies that have a lot in common from a cultural standpoint, such as a commitment to service and similar products. We were kind of surprised that there was less network overlap than we anticipated, which is a good thing because on a combined basis we now have more unique routes and unique assets in addition to more products and more locations we'll be able to reach. It's a good fit. Also, we think that there are a lot of great people at Sidera, [so]when we combine the two teams it will create a real powerful combination.
FT: Berkshire is effectively buying and merging both Sidera and Lightower. Are you seeing more interest from private equity firms purchasing service providers, and what is driving that trend?
RS: Well, private equity has always been interested in our space. I know Berkshire has looked at a lot of opportunities and it has been tough to compete for some of the transactions that have occurred over the last couple of years. The strategic buyers have platforms and synergies they can stretch to pay a premium for assets.
This is a perfect time for Berkshire, because we have two companies that are established and really have a platform to combine and management teams in place. It's a good situation for a financial buyer like Berkshire to jump in, and the Lightower management was not ready to cash out and move on, so we're all excited about staying on board and having new ownership. Our current investors obviously are pleased with the transaction, and the others will cash out and move on.
FT: You are going to be CEO of the combined company, but have there been any decisions about how the management team will be structured when the deal is complete?
RS: No, not yet. We're going to start the integration process. We'll probably have 90 to 120 days until we get regulatory approvals. We'll take a few months looking at both companies, how things operate, and creating an infrastructure that can not only support two companies the size of Sidera and Lightower today, but also support a company that we hope to be twice the size going forward. We want to make sure we have the best of the best and keep people that have knowledge of the legacy companies, the customer base, and the network—all of the things required to successfully manage and grow the business. These are important to keep in place.
I think we have seen other combination or acquisitions where a lot of the talent is let go. This is a business about high touch with customers, understanding the network technology, and having those relationships that you can maintain with the customers and the growth going forward. Certainly, we want to make sure we have people from both Sidera and Lightower to do that.
FT: Do you see the deal as a complementary one in terms of network and focus?
RS: The combination in Manhattan, where I thought where there would be overlap, there's is less overlap than I thought. Now, we'll create even more density in the New York metro, Manhattan, New Jersey, and Long Island market. Sidera has great fiber assets going from between New York to D.C. and around Virginia, Philly and Chicago with some routes to Toronto. It also has connections to other places where Lightower has traditionally had to pass on doing business with or lease facilities from someone else. Now, we'll have a much better footprint to sell additional services. We'll also be able to reach up to Maine and New Hampshire as Sidera has the old Northeast Optical Network (NEON) fiber network assets in Northern New England.
FT: The past year saw a lot of consolidation in the competitive telecom space. Do you think we'll see more consolidation in 2013?
RS: I think so. There are fewer opportunities and fewer companies to target than there were a few years ago. Zayo certainly has done its part in tying up a lot of the assets out there. There are other smaller independents that would be a good fit for Lightower/Sidera. We're going to have our organic growth strategy as well as acquisition opportunities for growth as well. We want to grow the business and leverage the platform and create even more scale than we'll have on a combined basis.
FT: Another big part of the deal is that Lightower and Sidera both bring extensive on-net fiber footprints to the table. Do you think this combined on-net footprint makes enhances your ability to compete for wholesale and enterprise customers?
RS: On a combined basis we'll have 6,000 unique buildings, when you put a building list together. Lightower for the last couple years has been selling to cell towers, and Sidera has a long history of providing network to the wireless companies for switch and aggregation transport. When we put it all together, we have a pretty nice package to sell to carriers.