Sizing up the deal:
Alinda Capital's purchase of a 50 percent stake in DukeNet Communications, the wholesale arm of Duke Energy (NYSE: DUK), illustrated again one of the micro trends of private equity investors either taking a company completely private or, in the case of DukeNet, becoming a major stakeholder.
What's significant about the deal?
A product of the late 1990s drive by the utility industry to offer fiber-based wholesale services to service providers looking to cash in on the Internet boom over their existing utility rights of way, DukeNet is one of a small group of utelco wholesale providers to survive the explosion of the dot-com bubble.
(DukeNet's) alliance with Alinda could provide it with more attention and necessary capital to expand its network operations to address wireless backhaul
Unlike DukeNet, which over the years has managed to build a steady customer base of wholesale fiber and large enterprise customers, a number of utility companies have either decided to sell off their telecom holdings to more traditional serviced providers and reinvest their energy in their energy business.
Although day-to-day operations of DukeNet will remain untouched as the current President and CEO Brad Davis, along with his current management team, continue to run the daily operations, its alliance with Alinda could provide it with more attention and necessary capital to expand its network operations to address wireless backhaul and other carrier wholesale capacity needs for cloud computing and data storage services.
With over 5,300 miles of fiber optic network capacity DukeNet quietly has made a reputation as a wholesale service provider. Perhaps its largest profile wholesale services deal came last year when Verizon Wireless (NYSE: VZ) named it as one of its fiber-based network wholesale providers in the Southeast markets where its parent company Verizon Communications does not have available wireline-based fiber facilities.
Alinda wasn't the only private investor to acquire a large stake in a competitive network player. In 2010, a number of private equity investors either sold off network assets they owned as part of exit strategy (ABRY selling Hosted Solutions to Windstream or Court Squared purchasing FiberTech) or bought a company completely private (ABRY's acquisition of RCN Corp.).