Zayo is continuing with its acquisition streak, reaching a deal on Wednesday to acquire First Telecom Services (FTS), a regional service provider serving business customers in both the Northeastern and Midwestern parts of the United States, for $110 million.
By acquiring FTS, Zayo will add an additional 8,000 route miles of fiber and about 500 on-net buildings to its growing network. What's more, the acquisition will give Zayo ownership of fiber routes on which it currently operates via long term indefeasible right of usage (IRU) agreements.
The majority of the company's success has been found as a wholesale provider to other carriers across its 11-state footprint, with the majority of its network revenue in Pennsylvania and Ohio via its Fiber Services Group (FSG). Additionally, FTS has been growing out its portfolio of business services, including MPLS and Ethernet, via the Business Services Group (BSG).
Getting ownership of these fiber assets is a plus for Zayo, as the service provider has already been offering services in FTS' area for a number of years. In the near-term it means that Zayo can more easily integrate the FTS network assets into its portfolio and make their products available to their customer base by the time the deal closes.
Another interesting element of the FTS fiber assets is that they run along FirstEnergy's rights of way (ROW). While Zayo certainly has in-house expertise to navigate the ROW process, having that established relationship with a major utility eliminates what can sometimes be a potential hurdle for most service providers in expanding their fiber networks.
Zayo expects the deal to be completed by the end of the year.
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