Oak Hill Capital Partners is acquiring Sovernet Communications, a middle mile fiber provider that serves Vermont, New York and southwest New Hampshire, creating a larger Northeast fiber provider that will be a bigger competitive threat to incumbent players Verizon and FairPoint Communications.
Financial terms of the acquisition, which Oak Hill Partners says is expected to close by early 2017, were not disclosed.
Upon closing this purchase, Oak Hill Capital Partners will combine Sovernet’s operations with FirstLight Fiber, which the private equity firm announced it was going to acquire in July.
Specifically, the acquisition will combine Sovernet’s network transport, broadband internet and voice services with FirstLight’s portfolio of data, internet, data center and voice services, which are backed by locally-based service and support.
When Oak Hill completes this purchase and other pending strategic transactions, including FirstLight and Oxford Networks, the newly combined companies will operate a total of about 9,500 route miles of fiber network and eleven data centers across New England and New York.
Sovernet itself is also a product of acquisition activity. Parent company Atlantic Tele-Network (ATN) purchased Sovernet in 2006 and since then it has operated as a subsidiary of the holding company. Later, Sovernet acquired NY-based Independent Optical Network (ION), a provider of transport services that was created as a partnership between twelve rural telephone companies in upstate New York.
Oak Hill Capital itself has become one of the latest consolidators of the Northeast fiber market. In March 2016, Oak Hill agreed to purchase FirstLight from its current owner, Riverside Partners.
Consolidation of the Northeast fiber market has taken off in recent years as players have seen opportunities to expand their reach into new markets while expanding their service portfolios.
Prior to this latest round of M&A, Oxford Networks acquired BayRing Communications in 2015 to create a combined company with a total of nearly 2,000 route miles of fiber providing access to nearly 50,000 buildings, four SOC 2 data centers, and direct access to all other major hub data centers throughout Maine, New Hampshire and Massachusetts.
FirstLight Fiber has also grown its presence in New England and upstate New York through a series of acquisitions and organic network builds. The Albany, New York-based provider has expanded its network base through three key acquisitions: segTEL, TelJet in Vermont and G4 in New Hampshire. At the same time, First Light Fiber added 36,000 miles into New York's Westchester, Rockland and Orange counties in January, giving it a total of 260,000 fiber miles throughout five states including New York, New Hampshire, Maine, Vermont, and Massachusetts.
While Oak Hill Capital is rapidly bringing much needed consolidation to the New England and Northeast fiber provider market, they certainly won’t be the last to make purchases.
Lumos’ pending move to become a standalone fiber-based provider could drive the company to possibly either pursue acquisitions of other fiber-based companies or become a target for another suitor like Lightower.
Another potential target is local telco FairPoint, which is facing pressure from Maglan Capital to put itself up for sale. According to a Bloomberg report, Maglan -- which owns a 7.5 percent stake in FairPoint -- wants a seat on the telco’s board.
But the Northeast is only one market where fiber network consolidation is taking place. A similar trend has emerged on the West Coast where Integra Holdings split itself into two providers -- Integra and Electric Lightwave -- as the company pivots to reestablish itself as a fiber-centric service provider.
Lightower and Birch could be potential suitors for Electric Lightwave and Integra. Lightower, which has been growing its footprint on the East Coast and Midwest could use the Electric Lightwave assets to establish a presence in the West Coast fiber market. Birch, which has been growing its presence through a series of tuck-in acquisitions, could deepen its SMB presence in the markets where Integra operates today.
- see the release
Oak Hill Capital acquires Oxford Networks, combines operations with FirstLight Fiber
Oxford, BayRing merge to create Northern New England fiber competitor to FairPoint, Comcast
FirstLight Fiber's 36,000-mile fiber extension targets wireless backhaul, enterprise opportunities
Updated Aug. 9 to correct incumbent information.