Fiber glut? What fiber glut? Three regional fiber service providers founded during the dot-bomb era--KDL, Alpheus Communications, and Fibertech Networks--that helped create this glut, according to a Wall Street Journal report, are up now for grabs with hopes of getting sizeable offers for their respective assets.
Evansville, Indiana-based KDL, which offers fiber services in 26 states, hopes to fetch $950 for its 30,000-mile fiber network, a price that would be ten times EBITDA. Rochester, N.Y.-based Fibertech and Houston, Texas-based Alpheus Communications hope to get similar valuations that would equate to $400 to $500 million.
None of the service providers are talking. KDL, a subsidiary of Q-Comm, and Alpheus would not comment on any sale. John Purcell, CEO of Fibertech, while confirming that a number of possible buyers expressed interest in his company's assets, would not reveal any other details.
What's driving consolidation of the regional fiber provider market is quite simply the growth of bandwidth-intensive Internet applications. According to estimates by Cisco, Internet traffic is growing at a rate of 46 percent and is expected quadruple from 2007 to 2011.
Consolidation of the fiber market is not a completely new phenomenon. Last year, Qwest (NYSE: Q), now in the process of being acquired by CenturyLink (NYSE: CTL), tried and failed to find a willing buyer to pony up $2 billion for its long-haul fiber assets. However, these regional fiber assets that were abandoned when many regional providers failed to find profits and were driven into bankruptcy could be attractive to other competitive providers such as RCN (NasdaqGS: RCNI), Time Warner Telecom (NasdaqGS: TWTC) and Paetec (NasdaqGS: PAET) to expand their respective network reach.
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