Recently in mergers Category

From an FCC Filing by Birch:

On May 11, 2009, Birch Communications, Inc. (f/k/a Access Integrated Networks, Inc.), Birch Telecom, Inc. (BTI), and BTI's certificated subsidiaries, and Cleartel Communications, Inc. and its subsidiaries, Cleartel Telecommunications, Inc., IDS Telcom Corp., nii communications, ltd., Now Communications, Inc., Supra Telecommunications and Information Systems, Inc., and Telecon Communications Corporation, filed an application pursuant to section 63.03 of the Commission's rules seeking approval to complete a proposed transaction whereby Assignees will acquire substantially all of the customers, customer accounts, and telecommunications assets of Assignors.

The interesting part is this statement: "BTI is a Delaware corporation, and together with its subsidiaries, is wholly-owned by BCI, a Georgia corporation. .. The following U.S. citizens hold a 10 percent or greater direct interest in BCI: Holcombe Green (66 percent) and and R. Kirby Godsey (32 percent)." Two people collectively own pretty much half of all the UNE-P CLEC's in the Southeast.

January of 2000 CNN announced: "In a stunning development, America Online Inc. announced plans to acquire Time Warner Inc. for roughly $182 billion in stock and debt Monday, creating a digital media powerhouse with the potential to reach every American in one form or another."

This morning, over 9 years later, TW is spinning AOL out, according to CNN, a TW company.

Steve Case on Twitter had a lot to say about AOL: "AOL Spin-Off Approved Last Night By Time Warner Board: http://bit.ly/ThYkx. My perspective on AOL & Time Warner: has been a long, tortuous journey - and after a difficult decade, its time to open new chapter. Merger could've been transformative: driven convergence of TV/Internet/phone, ushered in digital music & video, etc."

I have to agree there. There were culture wars between the AOL employees and the TW employees, a classic case of old media versus new media mindsets. At the time, all I thought was that AOL was going to become THE place on the web. Pay your $10 per month and access all of TW Media like Time magazine, People, etc.; see movie trailers; get CNN breaking news. None of that happened. It had all that content to work with and absolutely no idea what to do with it. It didn't even have a Broadband play - even though TW owned Road Runner at the time.

Back to Steve Case: "But synergy didn't happen. Didn't integrate businesses to drive innovation. Lots of missed opportunities. Glad breakup now finally happening. Agree w/ TW CEO Jeff Bewkes, it is best for AOL and for TW. AOL not what it was a decade ago, to be sure. Uphill battle to return to greatness. But doable. Wish the team at AOL the very best!"

Case added: "Thomas Edison: "Vision without execution is hallucination" - pretty much sums up AOL/TW - failure of leadership (myself included). Resigned as Chairman 6+ years ago, left Board soon after, urged company to go left or go right, integrate or liberate."

AOL-TW wasn't the only big merger that didn't enjoy the synergies: VZ-MCI, HP-Compaq, DEC-Compaq, and so many others. Heck, AT&T is one umbrella with seven separate companies un-integrated under it, much like Level3. So mergers look good on paper - and the money looks great to the shareholders, bankers, and execs, but I don't know any that have worked out. It usually leads to short term monetary gains for a few and a big mess for the rest. It creates no ultimate value.

What will AOL do as a stand-alone company? Ride the dial-up cash cow, while figuring out the advertising network model, I guess.

Voxeo acquired IMified this week. What is IMified?  IVR for IM.

XO's IVR service earned an award. (BTW, agents can team up with XO to sell IVR service as an overlay).

Ifbyphone is all about IVR in the Cloud.

ACD and IVR are two reasons that small businesses move to VoIP. It is far cheaper to pay for the hosted service monthly than to buy an on-premise hardware solution that can provide it.  It looks like the race is on to make Mitel, Avaya, and Nortel premise equipment redundant or obsolete as you will get up-to-date platforms with maintenance bought as a monthly service, usable by your employees and customers any where in the world.

With VZ shedding its last bit of rural landlines to Frontier, the blogosphere is alive with talk about Super RLEC's - Frontier, Fairpoint, CenturyTel, Windstream and maybe Qwest.

CenturyTel's coming merger with Embarq will give it the title as a top 5 ILEC is size. But these are declining assets as landlines are being shed for cellular and to some extent VoIP. How Super is that?

Telecompetitor writes, "For carriers that lack wireless assets, building the scale that can create  operational efficiencies and provide the means to profitably build and leverage broadband applications is paramount for future survival."

Building Super isn't easy. Fairpoint has been a flop. Huge debt. Broken promises. Increasing consumer complaints. Lots of line losses.  That's not Super.

I can't think of a single telecom merger that resulted in the synergies or integration that was promised. For the most part, it's just a CEO and Banker feast of bonuses. The consumers lose.

Look at Frontier. It isn't exactly innovation nation now. Sure it does some VoIP, but it's TV service is DISH TV resale.  And this RLEC has seen years of complaints at state PUC's, which means poor service. How will the integration with Verizon landlines improve that? I keep see the nightmare coming. Unfortunately, the regulators can't (or won't). (The same for the Embarq-CenturyTel deal. C-Tel's systems that I have interfaced with are older than dirt or PAPER!).

None of the RLEC's have a nationwide or even a fairly large cellular footprint. So it's just a matter of getting big and hoping to ride out the cash cow of wirelines, like EarthLink is doing with dial-up.

Remember the MCI Agents who didn't like the new deal under the Verizon Business umbrella, who were pushed aside and lost commissions? Did you know that when Verizon did their funky little deal with Fairpoint over the New England region, VZ agents were pink slipped. In fact, one agent is suing Fairpoint. It's the quote from Beth Fastiggi, a spokeswoman for FairPoint, that shocked me:

"We believe that our own local employees can better serve our local markets and, given the appropriate resources, will have the commitment and ability to increase our share of the local business market," Fastiggi said in a statement Friday.

Don't need agents. That attitude explains the lousy service, numerous complaints to the PUC, and the lose of over 100k lines - in a rural market!

Today, VZ announced it is spinning off the landline network in 13 more states - to a joint venture corporation with Frontier. I'm certain those customers are thrilled. At least, they had a slight hope of getting FTTH. Now, not so much.

Frontier does have a Business Agent Program. I don't know anyone in the program so I have no comment on how strong it is for agents.

Embarq agents are waiting to hear what happens to them with the CenturyTel merger. These mergers do impact both consumers and small businesses, especially the agent businesses.

Although it was AT&T's CEO that said We are a Wireless company, it is the actions of Verizon that make you stand up and take note. Today, VZ reached a deal with Frontier - a $8.6B all-stock deal. As Frost & Sullivan analyst Vanessa Alvarez tweets, "$VZ and Frontier will create company called Spinco, $VZ will still own 68%."  It looks like another Fairpoint deal. The only happy camper is VZ. It gets richer, rids itself of responsibilities, and screws the consumers by leaving them with a rotting network and a financially burdened phone company.  Where are th eregulators in all of this??

"The deal includes all of Verizon's wireline assets in Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin as well as some assets in California." [Yahoo]

Marketwatch announced that "Frontier will be merged with a separate, newly formed entity known as SpinCo, which will be spun off to Verizon's shareholders. ...SpinCo will carry approximately $3.3 billion of debt consisting of a combination of newly issued debt as well as assumed debt. Verizon will receive about $3.3 billion of cash or debt relief."

Looks to me like another Fairpoint deal. Ask New England subscribers how they feel.

 Thanks to the Arkansas Democratic Gazette for the chart.

Despite a big drop in earnings and revenue for the first quarter 2009, Windstream still managed to buy some more lines and customers by snatching up D&E Comm.

D&E Communications is an ICP, an  integrated communications provider, offering residential Voice, Video, Broadband and On-Site Computer Support services as well as business-class Networking, Business Continuity, IT, Security, Voice and Training solutions. D&E is an ILEC and a CLEC.

This stock-and-cash deal (worth about $330M)  "nearly doubles the company's operating presence in Pennsylvania with the addition of approximately 165,000 access lines and about 44,000 high-speed Internet customers."  That's about $2000 per subscriber.

"D&E Communications generated $148 million in revenue and $64 million in operating income before depreciation and amortization (OIBDA) in the twelve months ended March 31, 2009."  So the buy is about 2x Annual Revenue for those hoping to play at home.

"The transaction also includes six wireless licenses for 700 MHz spectrum covering a population of approximately 1.3 million in central Pennsylvania," according to the press release. 

While Windstream isn't having a strong quarter with dipping revenue, it is doing okay selling Internet and TV. It passed 1 million high-speed Internet subs by adding net 31,000 this quarter. In addition, more than 21,000 digital TV customers were added, bringing the total TV count to about 295,000. "It also recently finalized an agreement with DISH Network to sell digital TV to Windstream's commercial customers, Gardner said."

 

How does this work?

"AT&T Inc said Friday it will buy the bulk of Alltel Wireless assets being divested by Verizon Communications Inc for $2.35 billion, and will sell some Centennial Communications Corp assets to Verizon Wireless for $240 million." [telecomengine]

When they say divest assets, it's suppose to increase competition. Swapping assets between the two biggest players is not what was meant. "Verizon previously had said more than 30 companies had expressed interest in the Alltel assets." I guess only one was REALLY interested. (This burns my rear. Copps needs to say something - maybe block Ma Bell from buying Centennial.

Also, one is CDMA (VZW) and the other GSM (ATT). How do they even use the assets purchased?

"Under terms of the deal, AT&T will buy licenses, network assets and 1.5 million subscribers in 79 service areas, mostly rural areas in 18 states, the company said in a statement. .... Verizon now expects to buy former Centennial wireless properties, including licenses, network assets and nearly 120,000 subscribers in five service areas in Louisiana and Mississippi."

Qwest has started the process to sell its LD network. Asking price is just $3B. Suitors include Level3, Verizon, Ma Bell and tw telecom. From Forbes.com.

Well, it is conference month with the industry gathering at CTIA and VoiceCon (and other shows). And when we get together we tend to gossip. The latest rumors (some thanks to Telecom Ramblings) involve XO, TWTC, and Qwest.

Apparently, Qwest longhaul business - the original Qwest - is for sale, but who has that kind of money to buy it? Likely, a foreign carrier would make a play for it. But Telefonica has a deal with Level3; T-Systems (DT) has a network here that T-Mobile utilizes; NTT has the Verio network; Telia also has some fiber routes in the US. Sprint can't come up with the $2B or so for the acquisition. Maybe Orange (FT) can. But isn't Global Crossing a better bang for the buck for these same prospective buyers?

Now that XO has converted all of its debt to preferred shares for Carl Icahn, speculation is if they will buy something or get bought. Now that tw telecom has showed a profit, maybe they will take a swing. After all, twt has the most on-net buildings and the 2nd most route miles (next to L3). (Thanks to Rob Powell for the data).

Level3 just borrowed some money - $200M+. But that's just for operating expenses according to analysts. And what could you buy for $200M? And if you are Level3, why would you buy another company? You still haven't finished teh ongoing integration issues.