EarthLink (Nasdaq: ELNK) made it official today that it will acquire Waltham, Mass.-based One Communications for $370 million, a figure that includes the payment of about $285 million debt.
Already approved by the boards of directors and One Communications' stockholders, One Communications' shareholders will remain liable for all costs relating to the CLEC's pending lawsuit with Verizon New York.
News of EarthLink's acquisition comes after rumors emerged two weeks ago that Earthlink and fellow CLEC PAETEC were two of the frontrunners to make a bid for One Communications, which has in recent years struggled financially. In July, One Communications sold off its FiberNet assets to independent ILEC NTELOS (NASDAQ: NTLS).
The acquisition of One Communications is significant to EarthLink and its recently established EarthLink Business unit, which combines the assets it bought New Edge Networks and ITC^Deltacom. Likewise, EarthLink will integrate One Communications' assets into its new business unit.
With One Communications now in its pocket, EarthLink not only expand its IP network footprint in the Northeast, Midwest and Mid Atlantic regions, but also gain overlapping connection cities with EarthLink Business (formerly Deltacom) long-haul routes in major markets including Washington, D.C., Baltimore, Philadelphia and New York City.
When the deal closes, EarthLink will have a nationwide IP network with fiber network assets in 30 of the top 50 U.S.-based MSAs. In total, Earthlink will have a combined 28,000 route mile fiber network across 27 states, with 923 collocation facilities, 55 IP and circuit-based switches and 68 metro fiber rings.
"If EarthLink successfully acquires One Communications, then things start to become very interesting for EarthLink. Combined with Deltacom, the company will build a super-regional CLEC that reaches from Maine to Florida, westward to Texas, Wisconsin and Illinois," said Brian Washburn, Research Director, Network Services, Current Analysis. "I think that once it has this combined footprint, the company could really start to use this as leverage for the New Edge Networks business."
Still, Washburn cautioned that integrating One's assets into its fold won't be easy.
"I don't think that One Communications managed to pull together its integration of Lightship, CTC, Conversent and Choice One fully," he said. "EarthLink might be challenged to streamline the company at a time that I think it's already undergone rounds of austerity measures, and probably doesn't have a large amount of excess resources to spare to re-double its efforts to build a fully integrated business."
From an overall CLEC trend perspective, EarthLink's acquisitions of ITC^Deltacom illustrate a new growing wave of consolidation taking place in the competitive service provider industry.
- see the release
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