Zayo Buys AFS

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Zayo Buys AFS

As Rob Powell predicted, the self-proclaimed Fiber Bigot, Dave Rusin, CEO of Rochester-based American Fiber Systems, sold the company to Zayo. Some reports were that the sale price was $185M, but Zayo is stating that number is ridiculous. The original press release did not offer a price tag. 

Consider that Zayo financed $250M in debt at 10.25% in April. It's AGL acuisition is still pending. Zayo has a capital intensive business (building out fiber always is). And it's a VC backed company. Zayo smacks of a roll-up waiting for the right time to resell. I don't know when that right time will be because it looks like either Zayo is the sole bidder for these networks (AGL, AFS, etc.) or that they are the most aggressive bidder. Who then would be the buyer? Everyone I speak to that evens knows who Zayo is thinks it's just a roll-up.

Here's why I think that it has some issues as a long-term business:

Zayo's voice division was discontinued in March 2010. (See 3Q2010 earnings report). A little young to already give up on voice, but maybe it's outside its skill set. Makes me think that Z-Colo division will be closed in a year too.

The network is dissparate. Unconnected by its own fiber. And from my experience (and anecdotes from others) Zayo isn't sure where its assets are and takes a long time to deliver a quote. It's like dealing with KDL for heaven's sake.  I know they are powered but maybe they need a better database for network assets and quick quotes.

Like the AFS customer base, it is weighted towards the carrier, wireless and other wholesale segments. Wholesale telecom is not as profitable as retail. 

Zayo as a group does about $59M in revenue per quarter which is about $240M per year from $400M in invested capital. At 10% growth, how do you even pay back the note?

I get telecom math and accounting are fuzzy - ask MCI, Enron, Qwest. etc. But I don't see who can buy them or how they make it long-term. I ask why AGL, KDL, AFS, and other regional fiber companies are for sale. If fiber is king, why sell now? Makes no sense to me.

About American Fiber Systems:  Based in Rochester, New York, privately-held American Fiber Systems ( provides dark fiber and lit bandwidth services to carrier and large enterprise customers. Since its founding in 1999 by former Frontier Communications President, David Rusin, AFS has expanded to include 1,200+ route miles of metropolitan fiber networks across nine markets and regionally throughout the State of Georgia with 600 lit buildings.

Related Articles to 'Zayo Buys AFS'

Featured Events