TPx sells fiber assets to Uniti for $95M to pay debt, increase managed service investments

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TPx sells off its fiber networks to Uniti in a bid to pay down debt and fund its growing managed services business. (Gettyimages/simpson33)

TPx is shedding about 650 route miles of its fiber assets in a sale and leaseback agreement with Uniti, a move that the service provider says will enable it to pay down debt and invest in new managed services.

As part of the $95 million sale, which includes metro fiber assets in California, Massachusetts, Nevada and Texas, TPx will lease back these metro fiber miles for the next 15 years.

The service provider has the option to lease up to an additional 25 years. Upon closing the sale to Uniti, TPx will continue to operate and maintain the network.

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For TPx customers, partners and employees, it will be business as usual.

Russell Shipley, EVP of wholesale, engineering and operations for TPx, told FierceTelecom that the service provider saw an opportunity to gain capital to enhance its growing managed services business line.

Russ Shipley

“As we looked at the industry and saw the amount of fiber deals being done, we knew we had that asset,” Shipley said. “We saw that weren’t investing in last mile fiber and thought our capital would be better spent on growing our managed services business. The sale fit with a strategy where we can unleash the value and put it to work towards our growth business.”

After meeting required regulatory approvals, TPx expects that the transaction will close in the third quarter of this year.

Selling off its fiber assets to a REIT like Uniti makes sense for TPx, particularly as it builds up its managed services capabilities. While he did not provide a specific timeline, TPx plans to extend the UCaaS and managed service capabilities inside and outside of the United States.

“We’ll use some of the proceeds to pay down our debt and we’ll use some of it for funding our growth on the near-term basis,” Shipley said. “We have some initiatives in our UCaaS business deployments to expand internationally, expand our contact center capabilities, and on the IT side expanding our security services platform.”

Targeted fiber assets

In recent years, TPx has been building an arsenal of networking solutions via a mix of its own internal developments and acquisitions of other providers like Tel West and DSCI, two deals that enhanced its market presence in Texas and the Northeast.

By purchasing these providers, TPx also gained fiber assets in these markets.

“This sale to Uniti includes all of the owned fiber assets that span four different states and multiple markets,” Shipley said.

The origin of these fiber assets stretches back to when the former Mpower acquired certain assets of ICG communications in California—including ICG’s customer base and network assets including a 1,412-route mile statewide fiber ring and 915 miles of metropolitan fiber rings that connected 128 commercial buildings throughout major cities in California. TPx’s California intercity and metro fiber network comes largely from its acquisition of MPower.

“If you think back to the ICG assets that MPower acquired in 2005, that was the California base,” Shipley said. “We have since added to that network and expanded to make sure it had a ring topology for reliability and redundancy.”

TPx later gained a fiber network foothold in Texas when it purchased TelWest in 2013.

Finally, the acquisition of DCSI in 2015, the service provider gained an immediate presence in the Northeast U.S. and a broader set of managed service capabilities. By acquiring DSCI, TPx gained two benefits: a large set of business customers in the Northeast and additional unified communications, managed IT and connectivity services.

“When we bought the Texas assets from Tel West, which also happened to be ICG assets originally, we did the same thing,” Shipley said. “When we acquired DCSI that gave us a Northeast presence.”

Shipley said the fiber assets are a broad mix of sources in these markets.

“It was a combination of different assets and stuff we built over time that principally goes POP to POP and LSO to LSO,” Shipley said. “It’s not so much designed for last-mile access, but it could be because they are good metro routes.”

Enhancing UCaaS, IT services

When it completes this deal with Uniti, the question is what’s next for TPx?

For one, the service provider plans on enhancing its UCaaS and IP-based service capabilities like SD-WAN. And while Shipley could not address any specific targets, TPx will also consider purchasing other providers that specialize in security and UC services.

Shipley said TPx will also consider purchasing other providers that specialize in managed security and UCaaS.

“The deal also gives us dry powder if the right thing came along on an inorganic basis,” Shipley said. “We have nothing in the wheelhouse yet, but we’ll keep our eyes open and be opportunistic.”