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  1. #1
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    [EN] Verizon acquires XO's fiber business for $1.8B

    Verizon is acquiring competitive provider XO Communications' fiber business for $1.8 billion, giving it an expanded network to deepen its Ethernet penetration while satisfying its small cell and wireless backhaul needs.

    Sean Buckley
    February 22, 2016

    Buying XO's fiber makes sense for Verizon on a number of levels.

    By acquiring XO, Verizon will be able to address a broader range of enterprise customers with traditional lit fiber services like wavelengths and Ethernet.

    XO currently operates metro networks in 40 major U.S. markets with over 4,000 on-net buildings and 1.2 million fiber miles. The service provider's intercity network also spans 20,000 route miles connecting 85 cities.

    Being able to tap into those expanded facilities not only takes one competitor out of the market, but it makes Verizon more valuable for large business customers in that it will have more of its own fiber to provide Ethernet in more markets.

    Having the expanded fiber assets could also enable Verizon to regain or at least come close to regaining its Ethernet service lead over Level 3 Communications. Level 3 surpassed the telco on Vertical Systems Group's U.S. Leaderboard following the completion of its acquisition of tw telecom.

    While Verizon has a sizeable fiber footprint, it can't reach everyhwere so like other providers fulfilling large multi-site enterprise requests it has to rent fiber from other provdiers and this deal helps to fill some of that gap.

    "We also lease a lot of fiber outside our footprint for our enterprise business, Bob Varettoni, a Verizon spokesperson, in an e-mail to FierceTelecom. "We constantly evaluate all the options for fiber – build, rent, acquire – and these assets presented an economic way to acquire some of the fiber we need both for cell densification and for Verizon Enterprise Solutions."

    Verizon continues to see gains every quarter with strategic services like Ethernet, a trend that continued into the fourth quarter of 2015. However, a number of secular and economic challenges contributed to a 3.3 percent decline in total business revenues. The telco reported $3.2 billion in Global Enterprise sales, down 3.3 percent year-over-year from $3.4 billion in fourth quarter of 2014.

    Verizon can also potentially offload wireless backhaul costs it pays to other fiber providers outside of its wireline territory to satisfy its wireless densification projects, including small cells. The service provider has been an advocate of dark fiber-based solutions for its small cell network, and this deal could potentially give them more of those assets to leverage.

    As Verizon continues to carry out its network densification process, the service provider has been vocal about its desire to have dark fiber for small cell backhaul, a trend that its main competitor Sprint (NYSE: S) is now advocating.

    "We believe owning a fiber backbone will have significant benefits for VZ's wireless network," said Jennifer Fritzsche, managing director of the equity research group at Wells Fargo Securities / Wachovia Securities, in a research note. "The fiber footprint will help VZ densify its cell network and leverage XO's fiber footprint to more cost-efficiently deploy wireless backhaul and fronthaul for C-RAN (centralized radio access network) applications."

    The acquisition shouldn't be much of a surprise. Rumors were already swirling that Verizon wanted to acquire XO for its LMDS spectrum holdings, which it could use to provide an alternative wireless backhaul source.

    Instead, Verizon will lease XO's LMDS spectrum with an option to buy it before the end of 2018. XO has 102 LMDS licenses in 28 GHz and 39GHz bands.

    Varettoni confirmed that XO's spectrum covers bands it can use to conduct 5G testing.

    "This is spectrum in bands we can use for early testing on 5G in some markets, so we intend to lease spectrum for R&D purposes," Varettoni said.

    After meeting customary regulatory approvals, Verizon expects to close the acquisition in the first half of 2017.
    http://www.fiercetelecom.com/story/v...les/2016-02-22

  2. #2
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    PR: Verizon to acquire XO Communications’ fiber business

    HERNDON, Va.--(BUSINESS WIRE)--

    XO Communications (XO) announced today that Verizon Communications Inc. (NYSE, NASDAQ: VZ) has signed an agreement to purchase XO’s fiber-optic network business for approximately $1.8 billion. The acquisition is subject to regulatory approval from various governmental agencies and is expected to close in the first half of 2017.

    The transaction would provide Verizon access to XO’s fiber-based IP and Ethernet networks, helping to better serve enterprise and wholesale customers. In addition, the acquired fiber facilities will help Verizon continue to densify its cell network.

    Separately, Verizon will also simultaneously lease available XO wireless spectrum, with an option to buy that spectrum by year-end 2018.

    “This transaction will create a stronger provider of business broadband services for the customers of XO Communications,” said Chris Ancell, chief executive officer of XO Communications.

    Carl C. Icahn, the Chairman and Sole Shareholder of XO Holdings, said: “In 2001, I began purchasing the senior debt of XO, and the following year the company filed for bankruptcy. I then worked diligently with other stakeholders to keep XO alive, and in 2003 the company emerged from bankruptcy. The following thirteen years were a bumpy road for XO, as well as other telecoms, as we reckoned with major network overcapacity and other issues caused by overly optimistic projections and capital expenditures made by previous owners. In fact, we had to inject additional capital into the company several times over those years to keep it operating. Although this sale to Verizon does not represent a significant annualized return on our investment, we believe that in today’s environment it does represent the best achievable outcome for the company’s customers, employees and owner.”

    While Verizon and XO pursue requisite regulatory approvals from governmental agencies, XO will continue to operate independently.

    Evercore is serving as XO’s financial advisor in connection with the transaction. Thompson Hine LLP is serving as XO’s legal advisor in connection with the transaction.

    About XO Communications

    XO Communications provides the technology that helps business and wholesale customers compete in a hyper-connected economy. In the U.S., XO owns and operates one of the largest IP and Ethernet networks that customers rely on for private data networking, cloud connectivity, unified communications and voice, Internet access, and managed services.
    http://finance.yahoo.com/news/verizo...140600297.html

  3. #3
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    Tracking the Fallout From the Verizon/XO Deal

    February 23rd, 2016 by Rob Powell

    The dust from the announcement of the Verizon/XO deal has had a day or so to settle now. Let's ramble on a bit about a few unanswered questions, both from the past and for the future.

    LMDS Spectrum -- Was this truly the driver for Verizon's purchase? Does the leasing of that spectrum with an option to buy mean that much to the company's 5G? If so, what other pockets of LMDS spectrum are out there that have suddenty gone from worthless to valuable? Straight Path Communications is already making a play of it it seems with the former IDT spectrum, I hadn't even noticed that until yesterday. Level 3 had a pile from the Telcove deal, but one has to invest at a certain level to keep such things according to the rules from the original auction. XO did, I have no idea if Level 3 did the same. But I'm still waiting to see if this new world where 5G needs LMDS will actually materialize. The fact that Verizon didn't just buy it outright suggests someone is hedging their bets here. It could be Verizon that doesn't want to pay Icahn's price unless they really need it. Or depending on the terms of the option it could be Icahn making a bet that there could be a little more blood to squeeze out of this stone if he just waits yet a little bit longer.

    Verizon as a CLEC -- Until now, Windstream was the only major ILEC that has made a serious effort at competing in CLEC costume in other ILEC territories nationally, courtesy of the PAETEC and KDL deals. Yes, Verizon had the MCI/Worldcom/MFS assets of course, but those were more of an IXC with metro fiber and a large enterprise focus than competition at the SMB and mid-market level where XO has plenty of revenue. What does Verizon do with it, and what do their ILEC neighbors think about it? Verizon's focus hasn't been anywhere near the SMB and mid-market for many years, it's hard to imagine them seeing the XO purchase as an opportunity to change that. I mean, Verizon *could* use XO as a platform to revitalize its efforts on that front as well as on wholesale. It's just that of all the ways I might have come up with for them could choose to do such a thing, buying XO would not have been near the top of the list. It's not big enough to move the needle, and it isn't growing fast enough to add much dynamism. Of course, I could be wrong about that. Or they could be.

    XO's intercity fiber -- This has long been a point of dispute between partisans of Level 3 and XO. XO's national fiber IRUs on the original Level 3 network buildout were designed to make them XO's fiber in every possible legal sense, unlike the usual sort of IRU. They originally had 24 strands and an option on fiber pulled through a new conduit, but during the dot com crash they returned 6 of them in return for lower O&M and such. The exact terms of the deal are now known only to Level 3 and XO, and now presumably Verizon. But the scuttlebutt has for many years been that when they run out, at a time that may or may not be in 2-3 years, Level 3 would use what leverage they have over accessing and maintaining the fiber to bring it back in house or otherwise get it effectively off the market. It had the potential to be ugly, but I think the Verizon deal completely changes the picture. Level 3 didn't want XO to have it because XO was using it to compete in the wholesale transport space. Unless you think Verizon cares more about that space now than it has in the past decade, Level 3 has every reason to come to some new sort of deal with Verizon. Any additional revenue they can get off of 20 year old fiber is gravy if it doesn't materially change the competitive environment the way it did in XO's hands. The fiber adds to Verizon's diversity, and while they don't need it moving off it would be a pain, so they'd have reason to deal as well. So if Verizon's purchase goes through, I suspect this longstanding uncertainty gets resolved over a few beers. But we will probably never hear about those details either.

    The Icahn/shareholder lawsuits -- These are in court now, apparently, after years of lawyers doing what lawyers do. Does this $1.8B deal have any affect on those deliberations? One can easily argue that between the $1.8B, the remaining spectrum, and the benefit derived from the NOLs elsewhere in his business, Icahn made out like a bandit since he forced minority shareholders to sell to him in 2011. That's perhaps why he played down any success with XO since his entry back in the 2002 timeframe in the quote supplied with the PR. It won't affect Verizon of course, which of course can afford more lawyers than even Icahn can. But there are still a lot of people involved in these unresolved soap operas from the past. Now that XO itself stands to be consolidated, those chapters seem likely to be completed as well.

    Verizon's appetite from here -- Verizon buying XO leads inevitably to the followup question: what else might they be hungry for? Is this a one time thing, or are there underlying drivers that will make other deals similarly attractive to them? If it's LMDS spectrum they want, how much do they want to have? And if Verizon wants it, is AT&T ever far behind? If it's fiber assets, which ones were the real targets? I mean, Verizon hasn't bought fiber since the MCI/Worldcom deal, and they've sold rather a lot of it - albeit entangled with copper. In fact, they're still in the process of selling some of it now to Frontier. I don't even pretend to have the answers to any of these questions yet. Thoughts?



    http://www.telecomramblings.com/2016...erizonxo-deal/


    en_ron_hubbard says:
    February 23, 2016 at 9:12 am

    Regarding the option structure for the wireless spectrum, another speculation would be that Icahn wants to delay so as to more fully use the NOL.


    Rob Powell says:
    February 23, 2016 at 9:39 am

    Good thought.
    Última edição por 5ms; 23-02-2016 às 13:12.

  4. #4
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    Level 3's Patel says Verizon-XO deal means less competition in 10G, 100G markets

    March 4, 2016
    Sean Buckley

    Level 3 Communications isn't afraid of the rapidly consolidating fiber service market and the company sees Verizon's recent purchase of XO's fiber network as a potential opportunity to compete for business with other enterprises and carriers.

    Speaking to investors during the recent Morgan Stanley Technology, Media & Telecom Conference, Sunit Patel, CFO and acting CEO, said that the acquisition takes out a competitor.

    "In general, Verizon buying XO is a good thing for us," Patel said. "It's less competition and it's less competition in some of the in the 10G and 100G wavelengths markets."

    Similar to Zayo, Verizon and XO are big customers of Level 3 for metro and long-haul dark fiber. XO may have a 33,000 km network, but over 16,000 km of is supplied by Level 3 via a long-term indefeasible rights of use (IRU) lease.

    As parts of XO's IRU with Level 3 will expire in the next few years, some analysts believe that Verizon could work with Level 3 to construct a new IRU or an expansion for other routes.

    "When we look at our revenue with both customers, we don't think it impacts us much at all," Patel said. "When we look at what they're buying, XO was wanted long haul and it is dark fiber so we don't see any change there."

    At the same time, Level 3 recognizes that cable operators like Comcast are trying to move up market to serve larger businesses. Initially, cable had found success in serving the small to medium business (SMB) market.

    Comcast in particular has also been growing in areas like Ethernet. The cable MSO, which just a few years ago had no Ethernet presence, now holds a sixth place ranking on Vertical System Group's U.S. Ethernet Leaderboard, trailing Time Warner Cable, which will enhance its Ethernet holdings after being acquired by Charter Communications.

    While Patel acknowledged that cable could be an eventual bigger threat in the enterprise deals it is chasing, Level 3 mainly competes with larger traditional incumbent telcos like AT&T, Verizon and Orange Business Services and "generally it's not the cable companies."

    "When you actually step back and look at the breadth and depth of our network both from a metropolitan, international and subsea, there's no comparison to the large enterprises we serve," Patel said. "Having said that it's certainly clear whether it's Comcast, Cox or Time Warner Cable, they are serving larger enterprises that have multiple employees in multiple offices in the same city means they could be a strong competitor."
    http://www.fiercetelecom.com/story/l...ets/2016-03-04

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