Lightower and Sidera come together


The deal: The pending $2 billion merger of Lightower Fiber Networks and Sidera is yet another example of the rapidly consolidating competitive telecom provider market.

In late December, Berkshire Partners, a Boston-based investment firm, signed an agreement to acquire both Lightower Fiber Networks and Sidera Networks, creating a new service provider with a large on-net and metro fiber footprint.

When the deal is completed later this year after clearing necessary regulatory approvals, the combined company will be run by Rob Shanahan, Lightower Fiber Networks' CEO. However, when asked about the management structure, Shanahan said that they have not made any decisions yet.

He did say that Berkshire's intention is to put a management team in place that represents the best of both service providers in a way to maintain customer consistency and future growth.

"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," Shanahan said. "These are important to keep in place."

Shanahan said that while the two service providers have been neighbors for years, their networks don't overlap.

"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," he said.

Neither Lightower Fiber Networks nor Sidera are strangers to working with private equity firms or the consolidation trend taking place in the competitive telecom provider market.  

M/C Partners and Pamlico Capital acquired Lightower from electric and gas utility National Grid in August 2007, while ABRY Partners purchased the assets of RCN Corp. for about $1.2 billion in March 2010 and made the competitive cable operator private. Following the RCN acquisition, the company split the consumer and business divisions up and relaunched RCN Metro as Sidera Networks.

Why it's significant: News of the two companies coming together, or Berkshire's interest in buying the two providers should be of no surprise. Over the past three years, there has been an aggressive movement to consolidate the competitive telecom industry with a host of deals being made between made by providers themselves and private equity firms that want a piece of the industry segment. What's more, rumors that Sidera was going to be bought have been circulating since May 2011.

Regardless of the timing, when the providers complete their merger sometime later this year, they will become a more powerful competitive provider force with a broader set of assets.

Businesses that have operations in their soon to be combined footprint, will have access to over 20,000 route fiber miles and more than 6,000 on-net locations including commercial buildings, data centers, financial exchanges, content hubs and other interconnection facilities.