Now that you're hopefully recovered from the holiday season and have taken your tree to the local town hall to its final local landfill destination, I'd like to invite you to FierceTelecom's second annual Top Mergers & Acquisitions review.
While the U.S.-based Tier 1 service providers' M&A activity was relatively silent, apart from divesting some non-core business, 2010 was quite active for competitive and independent providers bulking up their fiber networks.
These fiber networks, once seen as dead carrion from the bygone Internet bubble era of the late 1990s, are becoming popular again as consumers, business customers and even wireless operators need new capacity to keep up with the ever-hungry demand for bandwidth.
As reported in a recent Wall Street Journal article citing statistics from investment bank Cowen & Co., there were 14 acquisitions in the fiber network business and 45 since the demand for fiber networks began to show a comeback in 2006.
Not only did the independent ILECs continue to consolidate--something that was seen with Frontier's bid for Verizon's (NYSE: VZ) rural phone lines and CenturyLink's (NYSE: CTL) impending acquisition of Qwest (NYSE: Q)--but also a number of savvy smaller competitors struck deals to buy smaller providers.
Not surprisingly, the motivations for these deals differed by the segment:
- Indie ILECs consolidate: In 2010, Frontier completed its acquisition of Verizon's lines in 14 states, but no less compelling was CenturyLink's bid to acquire the much larger but similarly rural-focused Qwest. By acquiring Qwest, CenturyLink not only expands its addressable traditional landline base, but it also gained a nationwide fiber network. NTELOS (NASDAQ: NTLS) and Windstream (Nasdaq: WIN), while not making multibillion dollar deals like their independent ILEC brothers CenturyLink and Frontier, augmented their own organic fiber network growth strategies to address new wholesale and retail service opportunities by acquiring regional fiber operators FiberNet and Kentucky Data Link (KDL).
- Enriching the fiber, business diet: On a more opportunistic yet smaller scale, competitive providers (Earthlink, Lightower, PAETEC and Zayo) continued to be active in acquiring other fiber operators. One of the standouts in the competitive group was Earthlink (Nasdaq: ELNK), which enhanced its business services unit by acquiring not only ITC^Deltacom, but also One Communications. Both deals enabled Earthlink, a provider once known primarily as nothing more than a dial-up Internet provider, to enhance its business network service presence with fiber networks that stretched along in both the South and Northeast competitive business corridors.
- Gone independent: One of the other interesting trends that took place amongst the competitive fiber service provider space was privatization. Among the notable deals made in 2010 were private equity firms ABRY Partners and Court Squared, which struck deals to take RCN Corp. and Fibertech private, while Alinda Capital Partners bought a major stake in Duke Energy's Duke Net wholesale subsidiary.
With a continual hunger by consumers for bandwidth-intensive wireless applications from the latest Android-enabled smartphones, wireline-based online video and high speed optical business and cloud services, the strategic acquisitions of these fiber networks will come in handy to address these needs.
Still, I'd love to get your feedback so I encourage you to utilize our comments section. Finally, take look at last year's list of our M&As in 2009 here and see how the past year stacks up against this year's report.--Sean
|2010 Top 10 Fiber Network Mergers & Acquisitions|
|Acquirer||Company Acquired||Deal Price||Network Assets|
|Alinda Capital||DukeNet (50% stake)||$137 million||5,300 mile fiber network|
|ABRY Partners||RCN Corp.||$2 billion||RCN Corp. cable network|
|CenturyLink||Qwest (in process)||$22.4 billion stock||173,000 route miles|
|Court Square||FiberTech||$500 million||5,000 route fiber miles|
|Earthlink||ITC Deltacom||$516 million||16,400 mile fiber network|
|One Communications||$370 million||11,700 route miles of fiber|
|Lightower||Veroxity||terms not disclosed||2,000 route network miles; 195 fiber-fed buildings|
|Lexent||terms not disclosed||150 fiber route miles; 200+ commercial buildings|
|Open Access Inc.||terms not disclosed||230 commercial buildings & data centers|
|nTelos||Fibernet||$170 million||3,500 route fiber network miles|
|Paetec||Cavalier Telephone||$460 million (cash)||17,000 route fiber network miles|
|Windstream||Q-Comm (KDL & Norlight)||$278 million||30,000 fiber route miles|
|Zayo||AGL Networks||terms not disclosed||added 850 route miles|
|American Fiber Networks (AFN)||terms not disclosed||800 route miles|