Zayo CFO desGarennes: There are plenty of attractive regional fiber players we could acquire

trench dug for fiber

Zayo may be an aggressive buyer of network assets, having purchased over 30-plus companies since its inception, but the service provider says there’s a smaller pool of regional providers it could choose from.

CFO Ken desGarennes told investors during Citi’s 2017 Internet, Media & Telecommunications Conference that there are a number of regional fiber players that could be attractive opportunities Zayo could pursue. 

“The overall M&A environment I think can be summed up by saying that there are much fewer opportunities today than there was 10 years ago,” desGarennes said. “There are still regional fiber providers out there that could be interesting tuck-in acquisitions that we would be interested in pursuing.”

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Zayo itself continued with its aggressive M&A streak in 2016 when it announced two deals: Canada’s Allstream and Electric Lightwave (ELI).

Each of these acquisitions is transformational for Zayo.

By acquiring Allstream, Zayo gained a much-needed entry into the Canadian market to serve customers that want one provider for the U.S. and Canada. Meanwhile, the acquisition of ELI helps Zayo establish a foothold in the desirable West Coast U.S. market.

“The road map with ELI and Allstream was different in that we were acquiring interesting and unique fiber assets that were embedded within a more full service business,” desGarennes said. “I don’t think there’s a ton of those opportunities out there in the U.S. and there’s probably some in the Europe.”

Led by CenturyLink’s move to acquire Level 3, the year 2016 was a time of rapid consolidation in the service provider industry.

A number of other regional and national players like Windstream, TDS and Lumos also announced purchases of EarthLink, InterLinx and Clarity—deals that will provide these operators with additional fiber and network assets.

When these acquisitions are completed there will be fewer large national players that Zayo could purchase.

desGarennes said that Zayo does not see as many pure-play fiber assets that it could buy from a CLEC that align with its network infrastructure focus.

“You could almost look at any CLEC and see some interesting fiber assets in them, but when you’re talking about the preponderance of managed services revenue to infrastructure-like revenue I don’t see a lot of other companies out there where we would be able to extract value,” desGarennes said.

As Zayo pursues regional fiber provider deals, desGarennes said the key criteria will “be price and whether we can acquire them at the right value.”

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