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Zayo Continues West Coast Expansion Buying Electric Lightwave PDF Print E-mail
Sunday, 04 December 2016 06:28


Zayo Group Holdings, Inc. has entered into an agreement to acquire Electric Lightwave, formerly known as Integra Telecom, for $1.42 billion in cash. Electric Lightwave, which provides infrastructure and telecom services primarily in the Western United States, has 8,100 route miles of long haul fiber and 4,000 miles of dense metro fiber in Portland, Seattle, Sacramento, San Francisco, San Jose, Salt Lake City, Spokane and Boise, with on-net connectivity to more than 3,100 enterprise buildings and 100 data centers.

“Electric Lightwave provides us another unique and dense regional fiber network that advances our position as the only national independent infrastructure provider remaining in the U.S.,” said Dan Caruso, chairman and CEO, Zayo. “Electric Lightwave has both strong metro fiber assets in Key West Coast markets and capacity and routes that will augment Zayo’s intercity footprint.”

Approximately 40 percent of Electric Lightwave’s existing revenue aligns with Zayo’s infrastructure-focused business segments and will be rapidly integrated into the core Zayo organization, processes and systems. The remainder, which is a valuable and viable cash-flow generating business, has a customer base that aligns well with Zayo’s Canadian SME and voice businesses. “Zayo has a proven track record of integrating key fiber infrastructure assets while also maximizing the value of more traditional telecom business units,” added Caruso.

Zayo expects to achieve significant revenue and cost synergies over the coming quarters, driven by the efficiencies of scale and achieved via Zayo’s proven, streamlined integration process. Zayo’s Tranzact platform and Salesforce.com implementation will provide seamless online access to viewing, purchasing and managing the combined customers and network.

Under the terms of the agreement, Zayo will acquire Electric Lightwave for a total cash consideration of $1.42 billion, representing a pre-synergized multiple of less than eight times LQA EBITDA of $180 million. In addition, Zayo anticipates more than $40 million in annual cost synergies to be realized throughout the integration process and will benefit from more than $400 million in net operating loss carryforwards acquired in the transaction. Zayo expects to close in the first calendar year quarter of 2017, subject to customary regulatory approvals and closing conditions. The transaction will be funded with a combination of cash on hand and debt.

Optic Access Acquisition

The acquisition of opticAccess further strengthened Integra’s western metro fiber network footprint. Following the transaction, Integra had dense, unique metro fiber routes in all major western markets, enhancing Integra’s ability to serve high-demand end-user markets including content and technology providers, financial services companies and international carriers (including the Asia-Pacific market), in high-demand geographies such as the Bay Area. Integra estimates that, following the acquisition, its addressable near-net demand (defined as telecom spend within 2,500 feet of its more than 4,000 route mile metro fiber network) will increase by approximately 40 percent, and it will have sizable additional opportunities within reach as it continues to expand and build its network.

Furthermore, the transaction differentiated Integra’s regional long-haul fiber network solution. Integra enjoys unique, owned, low-latency long-haul routes that connect all of the major western operating markets, key data centers (more than 100 connected to Integra network in total) and cable landing stations. The opticAccess acquisition specifically enhanced Integra’s West Coast long-haul route with a diverse low- latency path for primary and protected routes from Seattle to Los Angeles.

Integra recently announced its fully differentiated and enhanced approach to local design, account management and customer support for its Electric Lightwave (large enterprise, government, education and carrier customers) and Integra Business (regional and middle-market enterprise customers) units. The opticAccess acquisition extended Integra’s capabilities, breadth and reach to additional customers that Integra can serve with this differentiated customer service model.

Electric Lightwave Highlights

1996: Integra Telecom is founded at the Oregon Graduate Institute in Washington County. Initially providing telecom services at OGI, Integra soon expanded to offer phone and data communications to small and mid-sized businesses.

2004: Integra moves headquarters to Portland's Lloyd District.

2006: Integra pays $247 million for Electric Lightwave, a Vancouver company that spent more than $1 billion to build 4,700-mile fiber network across the western U.S., then nearly collapsed in the dot-com bust.

2007: Integra buys another phone-and-data company, Eschelon Telecom, for $710 million.

2009: Wilting under debt from the Eschelon deal, Integra averts bankruptcy by recapitalizing under new ownership led by Goldman Sachs.

2011: Founding CEO Dudley Slater pushed out, replaced by Integra Chairman Tom Casey. Casey quits seven months later.

2012: Integra repositions to de-emphasize its small-business services and focus on long-haul fiber connectivity for large organizations. Goldman Sachs exits, selling its stake to Searchlight Capital Partners.

2014: Integra moves headquarters to Vancouver.

2015 Integra buys Optic Access with an additional 3500 miles of fiber and a festoon submarine system

2016: Integra splits business in two. The larger fiber business takes the Electric Lightwave name.

Founded 20 years ago privately held Electric Lightwave was known as Integra Telecom for most of its existence. It moved to Portland's Lloyd District in 2004, then to the old Hewlett-Packard campus in east Vancouver in 2014.

Electric Lightwave employs 587 in Washington at its Vancouver offices and at smaller sites in Seattle and Spokane, according to Zayo.

"Right now it's too early to say what the impact (of the deal) on offices will be," said Shannon Paulk, Zayo's director of corporate communications. She said the company will evaluate its locations after the deal closes next year.

As the market grew more challenging. Integra changed chief executives multiple times and repositioned itself, dialing back on the small-business market to focus on the fiber network it acquired when it bought Vancouver-based Electric Lightwave in 2006.

A portion of the business retained the Integra name, under the same corporate umbrella, serving legacy business clients. It appears Zayo is buying both parts of Electric Lightwave.

Integra hadn't reported financial results in several years, but its struggles are evident in Zayo's announcement of Wednesday's deal. The Colorado company said Electric Lightwave brings with it $400 million in past operating losses, which Zayo can carry forward to deduct from future tax liabilities.

Zayo said Electric Lightwave has more than 12,000 miles of fiber-optic cable in the western U.S., connected to 3,100 offices and 100 data centers. The Colorado Company said Electric Lightwave's network will improve its own ability to compete with larger telecom businesses

Gibson Dunn & Crutcher LLP served as legal advisor to Zayo on the transaction. Latham & Watkins and Gray Plant Mooty served as legal advisors to Electric Lightwave.


Last Updated on Wednesday, 07 December 2016 08:57