On Rad's Radar? - mergers Archives

M&A: 3 UC Deals and a Cable

2013-05-16T18:50:20Z

Well, it was quiet, but now M&A is heating up with the weather.

"Private equity firm GTCR has acquired NewWave Communications from Pamlico Capital." NewWave is a cable company in the Midwest with 90,000 subs.

Iotum acquired FreeConference.com when it bought the assets of GCP. Calliflower is a conferencing service owned by iotum.

Evolve IP now calling itself the trademarked Evolve IP, The Cloud Services Company™, has "announced that it has completed the purchase and customer integration of iPiphany of Chicago, Illinois and Semperon of West Chester, Pennsylvania. All three companies are on Broadsoft, so integration should have been easy. I wonder if this is the start of the Broadsoft service provider consolidation.

Infonetics announced its US Hosted VoIP winners. Comcast came in first again. Comcast is likely Broadsoft's largest customer in the US for Hosted PBX. (XO is supposedly its largest US customer, but XO mainly sells SIP Trunking.)

Think about this: in 2003, Broadsoft's second customer started up with Hosted PBX, which means it has been 10 years for Hosted PBX. Ten years, 1000 providers, and only $1.5 Billion in HPBX revenue - that is sad.

In the same vein, ten years means that the VC and PE firms have been sitting on big investments for 10 years without cashing out! That is like wearing a cast on a broken limb, having an inch that you can't scratch, and counting the minutes until the cast comes off.

I wonder when Verizon and its VCE with Google integration will kick in and start taking names. I know it will take time. I mean, it took this RBOC 8 years to hit 50% penetration in just one market - Dallas, according to Fierce. BTW, 50% penetration is what it needed to be financially successful, according to the VZ CFO.

The Hosted PBX space has a couple of big problems: the big guys - VZ, Comcast, Cox, Bright House - are now in the game. They have a brand advantage and deep pockets. I am already hearing about many deals that are going to brands, including to EarthLink over an independent or stand-alone VoIP company.

I see more deals happening soon.

One Deal And One Bullhorn

2013-05-09T19:36:31Z

UNSI has been in the news lately. It was originally American Broadband, reselling DSL nationally. Then it changed its name to United Network Services, Inc. and became a facilities-based carrier, with 18 Points of Presence (PoPs) and interconnections (and NNIs) to over 150 carriers in the US (including cable, DSL, wireless, CLEC and ILEC). "UNSi's partners are able to leverage the relationships with these carriers, paired with the cost savings and convenience of working with a single partner, under one invoice."

In 2012, UNSi acquired IPNetzone, a nationwide MPLS network provider, adding an advanced backbone network to capabilities. They partnered up with their Derby Capital teammate RapidScale. Yesterday, they decided to acquire Airband in an all stock merger. The combined entity will be named UNSI and generate about $60M in revenue. This will add fixed wireless and Hosted PBX to the service offerings. The biggest competitors UNSI faces are EarthLink, MegaPath, Masergy and AireSpring which all play the same game - MPLS and HPBX.

The bullhorn is the re-emerging noise around tw telecom being acquired. A few months ago CenturyLink's stock took a hit when their bankers floated the balloon that C-Link would buy twt. C-Link is sitting on a boatload of debt - $20.6 Billion. To buy twt would only add to the debt. It would hamper C-Link from its integration of Savvis-Qwest-Embarq and its plans to "leverage those synergies".

Now the bankers are floating the Level3 will buy twt balloon AGAIN - for like the 3rd time. How??? I get why - take a fiber player off the table and add revenue. But how?

Level3 is NOT the sum of its parts - parts which include, most recently, Global Crossing. Level3 is horrible at integration. Maybe all telcos are because the Ma Bell umbrella is still a bunch of silos, but come on, integration is not what they do well. And synergies have never been realized from this - or quite frankly most any telecom merger.

I have an idea for Level3: fire the top guys that have been there since they bought WilTel -- all of them. Hire from OUTSIDE the telecom world for a new CEO and a new President. Level3 has all the assets in place to be doing far better than they are. In baseball terms, they are the Yankees with Bucky Dent or Ralph Houk managing. (Sprint, too , btw).

You know how you get out of debt? You sell stuff!!! Then you deploy stuff. Then you keep it running. POOF!! That thing you see is called revenue which will eventually get you to profit if you stop selling on price alone.

Apparently L3 quietly bought a San Fran based fiber provider.

2 Acquisitions

2013-05-06T16:48:04Z

Two acquisitions to mention.

iTalk acquired RocketVoIP. iTalk is know for its sleeve to turn an iPod Touch into a VoIP phone. RocketVoIP was an OTT (over-the-top) VoIP provider that offered unlimited international plans. It is an interesting combination. Unlimited VoIP on your iPod including International.

GTT buys Inteliquent data business for $54.5 million. This is the business that Neutral Tandem (the name of the company before it became Inteliquent) bought with its TINET acquisition in 2010 for almost $100M. It was profitable too, with revenue close to $70M. Inteliquent has been through some management changes, so this may be a step in the company re-focusing on its core products: voice. Or they just needed the cash. Who knows? It's telecom, where there is no rhyme or reason.

I Was All Set with SoftSprint

2013-04-15T16:11:24Z

I was already calling it SoftSprint or SprintSoft when Softbank announced a deal to buy 70% of Sprint for $20.1 Billion. Now Charlie Ergen has decided to make an offer for the whole company at $25.5 Billion. DISH is sitting on $10 billion in cash - and some 4G spectrum. DISH made a case to purchase Clearwire, but Sprint rebuffed that offer - by buying Clearwire. DISH says that the Clearwire offer is still on the table, separate from this one.

DISH merging with Sprint would be interesting. I mean, who wouldn't want Blockbuster stores to also sell satellite gear AND cell phones? It would look like a mini-Best Buy.

As TechCrunch explains, "That pre-existing deal came with a lot of visible support from both Softbank's and Sprint's top management, and came also with financial help worked in for the continued build-out of Sprint's network."

Would DISH be able to help Sprint build out a network? Now it would be 3 sets of spectrum - DISH, Clearwire, Sprint. It would be wholesale and retail. It would be Satellite TV and cellphones and videos. Did Charlie ever (successfully) do anything with Blockbuster? DISH announced that it sold the British arm of Blockbuster video last month.

Some Interesting Reads

2013-03-13T13:58:17Z

Zayo CEO Dan Caruso wrote a good blog titled "Is Bandwidth Production Lucrative?". In the wake of Jim Crowe stepping down at Level3, Caruso's analysis of the fiber players in an interesting read.

Personally, I think these CEOs - Crowe, Hesse, and others - have to take more responsibility for revenue, integration, value and culture. The role of CEO is more than just setting some ambiguous vision that your reports then have to crystallize and execute on.

Best quote from Mobile World Congress:

"Openness is not something to be afraid of. There are lots of business models available. But openness is also about being open to innovate." - Jolla CEO Marc Dillion (launched Sailfish at MWC)

FCC and FTC gave the green light for T-Mobile to merge with MetroPCS. To VZW and ATT, this is a yawner. To the consumer, it will just eliminate one of the all-you-can-eat players.

This news comes as Gary Kim writes about the spectrum crunch that never came. Please note that all of the Top 5 cellcos still have a bunch of spectrum that they have not deployed yet. It bears repeating: there is plenty of spectrum that they have not deployed yet! (Despite what Hesse spouts to the press. He likes being in the spotlight, which is fine, if someone else was running Sprint.)

Susan Crawford wrote an article about the lack of wireless competition. Every flavor of broadband - terrestrial or wireless - has clear winners and losers, but mostly losers, who we call customers.

I have beat this drum before but all the value in the US economy is in knowledge and innovation -- it is the Internet Economy. Stifling that due to profits for a few companies is not going to make the US competitive in a global race.

Nice blog about small business, Obamacare and the opportunity for channel partners.

In SAAS, the secret sauce is data integration - which fails almost 20% of the time!

One last one: at CPExpo, a channel AVP at ATT was given my book and read it and took the time to come over to say that he enjoyed it. Kind of a highlight at the show.

Big Moves

2013-02-05T18:51:06Z

You probably heard that Dell went private via Microsoft, Silver Lake and Michael Dell [Dell and Channelnomics]. Why go private? Because Dell's main business is tanking and being public is too transparent for a company in transition as Dell is. I don't know why but I think about Avaya when I think about this deal.

Virgin Media is looking at a US cable buyer.

An examination of the Oracle deal to acquire Acme Packet.

Just a few short days after About.me did its public launch in December 2010, it was acquired by AOL. Announced today: "Twenty-four months and several million about.me pages later, we continue our commitment to building the best personal identity service on the web. During the past two years, we've been thankful for the tremendous resources and support of our friends and partners at AOL. ... Today, we're thrilled to announce that we'll be spinning about.me back out, returning to life as an independent company that is financially backed by our management team and a truly amazing group of investors who have backed companies such as WordPress and Google. Our team will remain the same for the most part, and we'll continue our roles as co-founders."

Monday Morning Quarterback

2013-02-04T15:56:33Z

The 49ers got robbed by the refs twice in the last 3 minutes of the game. And the viewers got robbed because most of those commercials sucked. Just my opinion of course.

But we start Monday with Oracle buying Acme Packet for $2B! Sonus must be mad. They have a market cap (NASDAQ: SONS) of half that.

TNCI is still in bankruptcy and has a stalking horse bidder in Blue Casa Telephone. That may prove troubling for TNCI agents (and the Agent Alliance, who really bet the farm on the TNCI Equity Plan).

Telefonica is looking for Channel Partners. I am looking for one of Telefonica USA's channel people to reach out to me for an interview.

Interesting article from The Atlantic: Why Americans Hate the Media?

CallWave Patent Suits and a Rumored Acquisition

2013-02-01T17:49:28Z

At ITEXPO East in Miami Beach, where the parties are never ending it seems. No one thing says this but having spoken with quite a few people and adding it up myself, it looks like Leonid may get bought by Broadsoft. The two already work closely but a few crumbs on the path - like executive changes, Leslie Ferry at ITEXPO, and a few other crumbs - lead me to call this. A friend says that it wouldn't be a surprise.

It's kind of ironic that CallWave lost a patent dispute to J2 in 2007 and is now suing everyone - AT&T and Google, Verizon and Google, T-Mobile and Google, and Sprint and Google.

CallWave is also suing Telovations, which is in the process of being acquired by MSO, Bright House Networks.

CallWave Communications, LLC is an intellectual property company, according to its CEO's LinkedIn profile. It's this kind of litigation that waste taxpayers time and money. I could see if you were actually using the patent, but if you just sit on it... come on. We need patent reform in this country.

We Start the Year With Mergers

2013-01-02T17:54:03Z

Two Tampa companies merge "to create a Hybrid SuperVAR" (whatever that is). Vology acquired Bayshore Technologies. Vology is a hardware reseller. Bayshore Tech is systems integrator and will provide professional services for the combined company.

AVIS is acquiring ZipCar because (1) the economy is slowing and car-sharing seems like a bright spot, especially for the number ; and (2) Zipcar was a great entrepreneurial idea but a poor public company idea. Hertz is acquiring Dollar/Thrifty and Enterprise owns Alamo. This move will capitalize on the gradual decline of car ownership, especially in metro areas. Zipcar's technology will allow Avis to get rid of more people to be replaced by kiosks (like Alamo has). The VC's - including Steve Case's Revolution LLC which made $96M on this deal - are happy. Next up at the plate: Cars2Go, Flexcar, City Car and Car Share.

the third merger:

Imation buys storage systems provider Nexsan for $120 million. Storage is huge. Are you getting your piece of the pie by selling data storage??

HP has truly lost its way. Meg Whitman is right up there with Sprint's Hesse in CEO thinking. HP suing GM over executives that went to work at GM. Follow up litigation over R&D with this announcement: HP threatens to axe units that fail to meet targets. That will certainly motivate employees - NOT! HP used to be an innovation center. Now it just keeps throwing away assets. Poor management and an even poorer board of directors. Why isn't The Law Firm of Wohl & Fruchter looking into this level of fiduciary negligence by corporate managers?

Last Merger of 2012 - Maybe

2012-12-27T19:15:02Z

Sidera is merging with Lightower - to compete more effectively with the RBOCs, according to IBT.

The merger is being done by Berkshire Partners, a VC firm with no connection to Bershire Hathaway. It is a $2.2B deal. Both Lightower and Sidera are owned by VC's.

Lightower CEO Rob Shanahan will run the combined company, which will have network throughout the Northeast, Mid-Atlantic and Midwest, and provide access to more than 6,000 on-net locations, according to the BizJournal.

"ABRY Partners, which has owned Sidera for several years now, and Pamlico Capital, which is one of Lightower's major owners, will remain as investors in the combined company alongside Berkshire," reports Rob Powell. Powell reminds me that ARBY and Berkshire own TELx together.

This is a roll-up of roll-ups as Lightower consists of KeySpan, DataNet, Lexent, Veroxity, Open Access and NStar; while Sidera is mainly RCN coupled with ConEd, Neon, and Long Island Fiber Exchange.

This gives them a big footprint - and 6000 lit buildings is nothing to sneeze at - but $2B and you think you will compete with the RBOC's????

One problem with these mergers -- no one knows where the assets (fiber runs) are - which makes it very challenging to make this a profitable transaction. Plus when have these mergers ever worked out -- for anyone but the bankers? Bigger isn't better. Better is better.

A Little Bit of Tuesday News

2012-12-18T17:11:46Z

365 Main returns to the data center space with its completed $75 million acquisition of 16 data centers, in the US from Equinix. Some Equinix execs came along with the acquisition. The data centers - located in Buffalo, Chicago, Cleveland, Dallas, Detroit, Indianapolis, Nashville, New York, Philadelphia, Phoenix, Pittsburg, San Jose, Seattle, St. Louis, Tampa and Washington D.C. - seem like the former Switch & Data facilities. It was a great deal for 365 Main (and thier VC backers).

An interesting thing is happening, 8x8 has seen its stock increase in just the last six months from $4.25 to $7.40. What gives? Some of it is the hype around cloud. A good part of it is that the company is really hitting on all cylinders. The financials are looking good. It broke $100 million in business VoIP revenue. That's a milestone. The third reason is the PR - scoring a couple of patents and the Gartner Magic Quadrant. The final reason is that 8x8 is a good takeover target.

Sprint is busy with M&A activity. After Japan's Softbank agreed to invest $20 billion for a 70% stake in Sprint, the cellco bought some spectrum and customers from US Cellular. Now it has finalized a deal to acquire all of Clearwire. The $2.2B deal has been backed by TWC and Comcast - 2 of the three cablecos that own stakes in Clearwire. (the third is Bright House). So if all goes as planned, Sprint will own Clearwire and its spectrum, but will still have a spotty network that it needs to build out - AND will still be a distant third in the US cellular market. Another fine Hesse deal.

Cbeyond rolled out its own Broadsoft based Hosted PBX service. I have no idea how that meshes with their previous hosted Asterisk server in a cloud container. I also don't know how that will go over with its indirect channel. Cbeyond becomes just one more company to roll out Hosted PBX. Is there anyone NOT offering HPBX? The only interesting one so far is - and I hate to say it - VZ with its Virtual Communications Express. The interesting part is that it is OTT (over-the-top) and integrates with Google Apps for SMB. Thus, targeting the 4.5 million SMB's using Google Apps. Who else does that?

2 Small Acquisitions

2012-12-14T16:49:47Z

Zayo just can't help themselves. Zayo is spending $22 million to acquire Litecast/Balticore, LLC. "Litecast owns and operates the leading Baltimore metropolitan fiber network, connecting over 110 on-net buildings, including all of the city's major data centers and carrier hotel facilities. Litecast is focused on providing dark fiber and ethernet-based services to a concentrated set of Baltimore enterprise and governmental customers, particularly within the healthcare and education segments." It fills in the greater DC area for Zayo.

Alpheus today announced that it has acquired Net Star Telecommunications Inc. Net Star was Houston's 3rd largest ISP in 2006, according to the Biz Journal and the company website. No financial details were available.

Telovations is Getting Acquired!

2012-11-26T18:41:00Z

As the Hosted PBX space is finally gaining traction, carriers are buying instead of building. ShoreTel bought M5. Comcast long ago bought NGT. Even Broadsoft bought a service provider, Adaption Technologies.

It's public: Bright House Networks, a top 10 MSO, is acquiring Telovations, a Broadsoft based UCaaS provider. Tampa Bay is not only home to Telovations but one of the biggest markets for BHN.

Telovations will become part of the Enterprise Sales division at BHN, reporting to Craig Cowden, SVP, Network Engineering & Operations, and Enterprise Solutions, Bright House Networks.

This makes me wonder about the rest of the Cloud Communications Alliance members. Who's next?

On a similar front, 8x8 just made Gartner Magic Quadrant. It's stock is more than 50% higher than it was in June. Analysts have it a buy due to strong revenue growth. The market cap is about $457M for approximately $110M in revenue. It would be worth it for someone like TWC who does not have a Hosted PBX service yet. That is the funny thing about the BHN-Telo deal: TWC usually does things first and BHN follows. This time, it may be the other way around.

Moves and Changes This Week

2012-11-19T16:29:14Z

Cisco announced plans to acquire Meraki, a managed Wi-Fi company, for about $1.2B.

Broadsoft announced UC One and now Rich Communications Services (RCS) to be added to its BroadCloud SAAS platform. [UCStrategies]

After Softbank put $20B into Sprint, Sprint turns around and buys some US Cellular markets for $480M. Consolidation - that's all we have left as an industry.

RUMOR! Google and DISH launching wireless network! This is the rumor, since the FCC is about to rule on spectrum that DISH controls (40 MHz of MSS S-band spectrum in the 2 GHz band, that the FCC renamed AWS-4). This spectrum may get cropped and added to the H-block auction. Should have an FCC announcement by Thanksgiving.

Right now, One in five smart phones sold in the U.S. is from the Samsung Galaxy series. I guess the $1B patent fine was nothing!

An Agent's take on Level3

2012-11-06T18:05:33Z

"Telecom is no stranger to change." Moreso today than ever, huh? Yesterday, Chris Palermo of GCN, a telecom brokerage firm, was on a panel with Level3 discussing the Global Crossing-Level3 integration at Microcorp's One-on-One event.

Palermo gave some advice to agents that they can't be complacent, that they need to Adapt to survive.

Palermo constantly asks "Where is the next thing going?"

On the GC-L3 Integration, Palermo noted that orders were taking longer. It was noted by the L3 team that there was more integration work to do and that it takes time to get done. Good to know that they know that.

Palermo notes that with the merger, he has been able to reach more areas like Asia and South America with less restrictions in order to sell services globally. He also stated that the merger represented a lot of Potential for Level(3). I have to ask: "When will we actually see that potential cash in?"

Last piece of advice from Palermo: Ask your customers what their competitors are doing. It makes for an interesting conversation.