EarthLink (Nasdaq: ELNK) has put another piece of its super-CLEC business puzzle together as it completes its acquisition of One Communications.
Under the terms of the previously announced agreement, EarthLink will pay about $370 million for One Communications, a figure that includes the repayment of $282 million in company debt and issuing about three million shares of EarthLink common stock.
Another $21 million will be deposited into escrow to fund potential One Communications post-closing obligations as outlined in the merger agreement.
Focusing on serving multi-location business customers with a mix of MPLS-based IP services, EarthLink will integrate One Communications into its EarthLink Business division. By adding One Communications to its portfolio, the EarthLink Business IP network will span over 28,000 route fiber miles across 27 states with over 1,300 collocation sites, 55 switches and 71 metro fiber rings.
The addition of One Communications instantly gives EarthLink an IP network footprint in the Northeast, Midwest, and Mid-Atlantic regions in addition to overlapping connection cities with EarthLink Business (formerly Deltacom) long-haul routes in major markets including Washington, D.C., Baltimore, Philadelphia and New York City.
Rolla Huff, EarthLink Chairman and Chief Executive Officer of EarthLink, said in a release that by adding One Communications to its fold they "now have a fiber-based IP network that covers a substantial portion of the key business markets across the eastern half of the United States, as well as substantial revenue and EBITDA scale in our strategic line of business."
Of course, in purchasing the assets the challenge for EarthLink will be around network integration. During the 19th Annual Media & Telecommunications Conference hosted by Deutsche Bank Securities in Palm Beach, FL in March Huff said EarthLink is taking a careful approach with integrating the assets of both Deltacom and One Communications.
"People get in trouble because they promise too much, too quickly and assume that it won't cost very much," he said. "We don't go into that business with that assumption. We said it would take three years and we've talked about $20 million in synergies for each of the transactions or $40 million in total."
Having done over 131 deals over the years, it's not like EarthLink does not have experience in integrating acquisitions into its residential business fold.
To ensure a smooth integration process of Deltacom and One, EarthLink has bolstered its program management group that manages the overall integration program and then each of the functional areas have dedicated people that focus on nothing but the integration process.
But even with its integration program in place, Huff said the success of integrating Deltacom and One Communications into its business unit fold "really does come down to detailed execution."
For more:
- see the release
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