Earthlink (Nasdaq: ELNK), the service provider once synonymous with residential dial up Internet service, is expanding its business service play once again by acquiring ITC^DELTACOM (OTC BB: ITCD.OB).
Under the terms of the agreement, Earthlink will pay $516 million in cash, including $325 million in debt, for ITC^DELTACOM.
By acquiring ITC Deltacom, Earthlink will immediately enhance its IP network infrastructure and solution set that combines its existing ISP and IP-focused businesses with Deltacom's integrate communications business.
A key piece of the deal is Deltacom's network assets. Out of the deal, Earthlink will instantly gain a 16,400 mile fiber network in the Southeast-75 percent of which is either owned or controlled through Indefeasible Right of Use (IRU) agreements--in addition to a 14-state Synchronous Optical Network backbone with 35 metro fiber rings, 294 collocations and 20 voice and data switches. Deltacom currently serves over 32,000 small and mid-size businesses, multi-location enterprises, government agencies and wholesale customers in the southeast with services including Multi-Protocol Label Switching (MPLS) and IP-based products.
Ed Gubbins, Senior Analyst, New Paradigm Resources Group, believes that the addition of ITC Deltacom's assets combined with the nationwide reach will give Earthlink another weapon to better fend of cable competitor's when bidding for larger business customers.
"The combined company will have an interesting, asymmetrical structure--nationwide in scope (thanks to Earthlink's acquisition of NewEdge) but far denser in the Southeast," he said in an interview with FierceTelecom. "That will be helpful in competing for medium-sized business customers against the cable companies, which don't have that nationwide footprint, and in winning large enterprises based in the Southeast that have locations in other markets."
When the acquisition is complete, Earthlink will expand its employee base to slightly fewer than 2,000 people with headquarters in Atlanta, Ga. and led by Chairman and Chief Executive Officer Rolla P. Huff, President and Chief Operating Officer Joseph M. Wetzel, and Chief Financial Officer Bradley A. Ferguson.
- see the release here
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