Then the announcement came that GTT had picked off Giglinx Global, a wholesale reseller of IP and network. Details were not disclosed, but revenue was assessed at $16M.
This morning, GTT announced that they were buying Global Capacity from Pivotal Group. [Pivotal Group acquired GC from Bankruptcy in 2011.] "Under the terms of the agreement, GTT will pay $100 million in cash and issue 1.85 million shares of GTT common stock, to the sellers at closing. GTT said it expects that Global Capacity's annualized revenue will be about $200 million at close," according to the press release.
GTT is a stew consisting of WBS Connect, PacketExchange, N-layer, Tinet, UNSi, MegaPath, One Source Networks, Hibernia, and these 3. It has a Tier 1 network according to Dyn. And it is looking more and more like GTT is the new Level3, as L3 goes quietly into the closet of CenturyLink.
Rick Calder, GTT president and CEO has repeatedly expressed that he expects GTT to achieve the "financial objectives of $1 billion in revenue and $250 million in Adjusted EBITDA."
No idea what the magic is with $1B in revenue for the sake of it. Intermedia Communications hit the Billion dollar mark in 2000 - and collapsed in 2001 selling to Verizon. PAETEC hit $1B in revenue before being scooped up by Windstream. No clear idea who would buy GTT if they hit $1B in revenue.
GTT's revenue last quarter were $182.4 million, which is $700 million annuallized. Add in GC at $200M and GTT will almost hit a billion in revenue (with a billion in matching debt by the way.)
Another company striving to reach a Billion first is RingCentral. (I think Vonage will hit it first, since they have Consolidated Revenues of $243 Million in the last quarter. Vonage Business revenues are expected to be $486M in 2017.) RC's quarterly report says Total revenue grew 29% year-over-year to $111.8 million. This makes RC revenue about $450M, a little behind VB.
RC's CEO Vlad Shmunis says, "As we look ahead, we are excited about the market opportunity for cloud communications as enterprise customers empower their global and distributed workforce to work anywhere, any time, and on any device. This market transition will fuel our growth to $1bn by 2020."
RC is riding high after Synergy Research marked them as a Leader in the 3 spaces of UCaaS: Retail, Wholesale and Cloud Comms.
"With a 19% market share by revenue, RingCentral is growing twice as fast as the overall UCaaS market, according to Synergy Research." So where does that put VB? It isn't even listed. RC is followed by 8x8, Mitel and ShoreTel in the report. That's why I just love analyst reports. P2P Baby! P2P!
I wish instead of spotlighting the revenue, they could spotlight customer care, trouble free deployment, retention, and ease of doing business. Instead it is a race for revenue, gobbling up companies, and a mess to deal with. Integration is a Myth in Telecom. It is smoke and mirrors with duct tape, foil and pink slips.
]]>The other rumor is that Altice which bought Cablevision and Suddenlink is looking at a nearly $2B IPO and will use those proceeds to buy Cox. But that may not happen because Charter now wants to buy Cox.
John Malone, the pioneer cable consolidator, has been all about consolidating cable, telco and wireless. His Liberty Interactive just acquired Alaska's GCI for $1B. There is noise that he would flip that to Charter. Cox plus Bright House plus TWC plus Charter plus GCI gives a 49 state footprint and would make that entity bigger than Comcast.
Charter was fined by New York State $13 million for not living up to its merger agreement. The rest of us are enjoying newer, higher pricing.
Meanwhile Comcast is being sued for cutting a small Texas ISP's lines and putting them out of business after they rebuffed an offer to be acquired by Comcast.
Just to add some notes, a bunch of Senators asked the DOJ to "closely scrutinize AT&T's proposed acquisition of Time Wamer." It won't change the course of this consolidation.
As 5G rolls out -- or 4G gets density to satisfy the bandwidth consumption of mobile Americans, you pick -- it will require a lot of fiber to towers and small cells. The editor opinion on Fierce makes it sound like the cellcos weren't hard nosed negotiators before now. Sheesh. There has always been a cap on how much a cellco would pay for bandwidth to a tower. Always.
Nearly 25% of Urban Americans aren't connected to broadband internet, usually due to cost for broadband. And despite the fact that Americans pay more for broadband than other countries, Wall Street is asking the ISPs to charge more. Greed.
The divide between rural broadband and urban is still large. The short fall at the USF Fund isn't helping. The telcos, including AT&T, want that funding to do any build outs. A political hot potato to add to the pile with Net Neutrality, mergers, healthcare and the whole American infrastructure (bridges, roads, power grid).
Bigger not Better.
Who thinks that the CenturyLink acquisition of Level3 will be derailed by the $12B lawsuit that C-Link is facingin the wake of charges that they pulled a Wells Fargo accounting scam?
One last thing: GTCR acquired Inteliquent. GTCR also owns Onvoy. They merged them and decided to keep the name Inteliquent.
]]>What happens with Broadview Networks under Windstream? Windstream is only midway through its integration of EarthLink. It will now have 8 UC platforms.
That isn't too confusing to all of the sales channels. Eight to choose from! WIND should be a one stop shop for everything UC and SIP at this point. [Similar to VARs hitting up a VAD like SYNNEX for many of these same vendors.] To do that, WIND would have to hire in some name brand SIP Experts to start beating that drum - loud, clearly and often. Currently, the message is a new flavor of UC every webinar. No over-arching
The noise about T-Mobile and Sprint merging is getting louder. Here's the problem: Recall the mess that the Nextel-Sprint integration was. This will be worse. Why? T-Mobile didn't even really integrate MetroPCS. What synergies are there really? It would simply be to get bigger, not to be a better competitor. For at least 24 months, VZW and AT&T would simply kick its ass - and they wouldn't be able to do anything about it.
That sums up the Level3-CenturyLink merger as well. That is scheduled to start in September if California and a couple other states don't derail it. This will be a mess for customers and partners alike. The product set is so different. Level3 is wholesale VoIP, international, transit and transport. CenturyLink is consumer, small business, mid-market, broadband, voice and some cloud. Very different sales skills.
Both exited data center, but CenturyLink has acquired many cloud and security companies in the last few years. They haven't done much with it because they don't really sell to Enterprise like they would need to. Plus Branding. Plus confusion over at Savvis after that acquisition.
None of that factors change post merger. None. One problem with many of these telcos is that they don't bring in fresh blood. Frontier just hired from Verizon for VP of sales and retention. Pull in someone from outside telco. The biggest hurdle: Culture. Culture eats Strategy for lunch.
Most of the major CLECs are gone: XO, EarthLink, Level3. Others are transitioning: TPX, AireSpring, Birch, Mettel to try to figure out what business looks like with network resale and managed services. It is a different world.
Everyone was betting on UC, but most couldn't get over the deployment headaches. Then when the price war started, they not only weren't prepared for the war, but couldn't or didn't get into it. The latest top 10 leader board for UC doesn't look too much different than 2015 or 2016. Next year it will for certain.
Windstream and Charter should look different in 2018.
Cisco's Spark revamp at EC17 coupled with its latest acquisitions and lay offs might have an effect on Cisco UC seats later this year. Or the acquisition of West Corp by Apollo Management for $5B and change might stall sales. Some of Cisco's other partners - like FLTG in NY - also got acquired. Integration after acquisition always affects sales (and retention).
AT&T and VZ look to be big winners while the CLECs shift and transition. Some of the other players in the space - like Zayo and GTT - also made acquisitions. But are they really replacements for Ma and Pa Bell or even WIndsream, Level3 and C-Link? They have a window of opportunity that is for sure.
Zayo grabbed ELI and Integra. All of the press is about fiber to the tower, so I am thinking that will not be a C-Link or WIND alternative.
Comcast will pick up some business. At $6B in CLEC business revenue now, it almost surpasses most of the CLECs in revenue. They need to take some friction out of the quoting and ordering process. (Charter too! Unbelievable that at its size, it is so arduous to process quotes and orders.)
Until the next merger is announced this is what it will look like. The channel often went to CLECs because of channel friendly attitude as well as suitable product set. This time round the channel will be looking at companies NOT in the midst of turmoil. Ease of doing business will be relative. Just another reason businesses like using channel partners: so they don't have to deal with it!
]]>Even Fairport, acquired by RLEC Consolidated, is upgrading its network for higher speeds. Some of this is due to the fact that cable is winning the broadband war. Some of it is powered by USF Reform whereby broadband is the metric for dollars. Add in the Connect America Funds (CAF) and other federal and state incentives for broadband and middle mile fiber deployment. AT&T, Verizon, Windstream and CenturyLink have all talked about upgrading the broadband infrastructure. (BTW, this flies in the face of the new FCC Chairman's claims that investment went down after Title II.) It comes down to revenue - and DSL was not cutting it.
Fiber deployment is tough (just ask Google). Many providers use a mix of technologies. TPX (formerly known as TelePacific), Windstream, XO and Google Fiber use fixed wireless for broadband. Thousands of WISPs in America have been utilizing wireless to deliver broadband for years. The bigger guys are now jumping on the bandwagon. To be fair, the technology is not only better, but cheaper.
This from DSL Prime: (from Sail Internet in Fremont California) "George Ginis used Mimosa's super Wi-Fi to connect a customer a customer with 435.74 down, 331.83 up, and 4 ms ping. 5 GHz Mimosa is designed like a mmWave network but a heck of a lot cheaper than 28 GHz. Interesting alternative."
DSL Prime has an ad from Sckipio about Virtual fiber. "Extend your fiber with 100-300 meters of single-port G.fast. It can save expensive trenching for cell towers, small cells, basement fiber, commercial customers and others. A very thin management layer allows operators to keep their existing GPON management layer. Sckipio makes it effortless to add G.fast to any GPON network." G.fast uses copper like VDSL2. We'll see if it gets adopted in the US like it is in Europe.
Also on the copper side is trials by ASSIA for Terabit DSL. See here. Companies are at work to extend the life of wireline broadband to satisfy the consumer appetite for downloading videos. On the business side, the same technologies will be used to feed the business appetite for cloud apps - fixed wireless, 4G/LTE-A/5G, DSL/T1, cable modem and fiber. SD-WAN will be layered on top for metrics, failover/resilience and more. Interesting times.
]]>I try really hard to avoid cablecos. They don't like the Channel; they don't like wholesale. It seems that direct sales reps can get pricing much faster.
Unfortunately, cable is chasing market share by practically giving away services. So with that in mind I had to get a quote for a EPL between Nashville and Tampa. This would involve Comcast and Charter. Let's examine the timeline:
Request for quote enters the system on 3/15. On 3/21 Survey shows FL location serviceable with construction. Sent email for pricing. On 3/28 after buffing them, I get "budgetary" pricing. On 4/3 client asks for contract. On 4/26 I am still waiting for paperwork and the "formal" pricing.
How does a company who "As of December 31, 2016, Charter's network passed 49.2 million homes and businesses, and served 26.2 million residential and small and medium business ("SMB") customers" take so long to price and run contracts?
I know it would be an effort but there's this thing called Google Earth that you can use to map your network, so every site survey doesn't take days. MasterStream has a pretty good interface for quoting. There are tools in this cloud age to take some fo the friction out of the process - if anyone actually wanted to.
This raises some questions:
I can't even fathom what a Desktop as a Service process must be like now that Navisite is under the Spectrum umbrella.
I know this looks like a bully pulpit kind of blog, but I can't be the only one who finds this ridiculous.
It gets better. One of the Tier 1 ISPs agrees to sell my customer a 1GB pipe that goes to Atlanta from Jackson, Mississippi. Route diversity was needed for my client, an ISP and VoIP Provider. Turn up took 111 days on a lit path. The Tier 1 ISP used Uniti Fiber for the loop. It was a mess.
The CFA (facilities assignment inside the central office where my client is collocated) was ignored, which created the first of a number of problems. TTU (test and turn up) was basically, "We plugged it in!" Repair had to be engaged to get it to work. (A new NID had to be installed.)
BGP took an extra week to get working properly. It only all started working properly yesterday. It was ordered on 12/19/16.
And the client says it routes to Dallas, not to Atlanta. Fantastic.
I turned up another circuit with an ILEC. It was a 20 MB DIA, but I guess 20x20 had to be specified, because it came up at 18x6. I don't even know how you make these kind of mistakes. This was noticed on the day after turn up, but we had to go through repair to get it fixed after the turn up engineer ignored all emails for 3 days.
What the hell is wrong with telecom that they can't just do the job they are hired to do? Every day we hear about airlines having big issues, but telecom firms have even more problems. I think it is just that we EXPECT them in telecom.
All I keep thinking is: If they can't deploy Internet pipes correctly in a timely manner, who would want to try using them for something complex like IAAS or security or UC?
And let's let them do more M&A! Everyone of the carriers listed has been involved in M&A in the last year. All of them suffer from the integration -- or choose to blame it.
]]>In this podcast, I speak with TelePacific's SVP Ken Bisnoff on why TelePacific is re-branding. The CLEC of old is gone. Telecom is shifting to be more than voice and Internet. TelePacific has transitioned to a Managed Services Carrier with its acquisition of DSCI. TelePacific is not the same company it was even 5 years ago. It is now a Tier 1 CSP for Microsoft. There is a SOC (security operations center) in St. Louis. The lines of business have changed. Now the name will too.
One point made during the podcast to note: the providers are shifting, but Agents need to shift too.
If you cannot see the flash player, you can download the mp3 or listen on Soundcloud.
]]>Now imagine that you are so far behind in voice that cablecos are considered the incumbent!
You watch as ESPN - THE sports channel for decades - loses 3 million subscribers in three years to the tune of $500 million in lost revenue! NBCU (owned by Comcast) is closing channels and re-branding others.
DISH Network launches Sling TV, an over-the-top TV streaming service starting at $20.
Netflix, Hulu and Amazon Prime put out their own quality content. Game over!
I don't know where TV goes from here because the business model is falling apart. Not only subscriber dollars are declining but advertising dollars fall right alongside.
Newspapers went through this - and are still struggling to find a business model that works. Cablecos knew about this problem five years ago but chose to stick their head in the sand as well. I truly believe ILEC executives have ZERO idea how to compete, so they follow the leader and basically act like a chicken in a yard.
Worse, I read today that in a couple of years, auto companies, which account for 10+% of spending, will likely not have to advertise because of connected cars!
]]>The Age of the CLEC - the competitive carrier - is at end. They fill gaps now, like Birch, Bullseye and Granite for POTS and other legacy services. XO is part of Verizon. EarthLink absorbed by Windstream to become like AllWorx, USLEC and Paetec, a memory. Level3 will be a division of CenturyLink, where it will cease to be a rival to the RBOC in the Enterprise.
Net Neutrality is going away. That zero rating investigation to determine if giving some content a free rideover all other content was fair has been closed.
It is simply cable or ILEC. And both groups have to be wondering how much longer they can continue to carry their massive debt. The big dilemma is that ARPU is stagnant but subscriber counts have peaked. Cord cutting is a real issue for cable, telco, satellite and content owners. NBCU closed two channels recently and re-branded another. Apparently, twenty five cents per subscriber per channel per month isn't enough any longer. And advertising rates are a little off too. The economics of many legacy businesses are being blown up!
The cost of services increases as more small cells are deployed to blanket coverage for 4G LTE, LTE-Advanced and how much will 5G cost? If ARPU is stagnant for cellcos in this price war, yet the cost to build and maintain the network remains constant and you don't lose any subscribers, all is good.
Sprint and T-Mobile have waged a brand battle against Verizon and AT&T. It has worked to a degree. But all 4 carriers are losers. The foreign owned T-Mobile and Sprint can afford to lose money for a while, but how long?
With the subsidized phones are gone so are contracts and large ETFs. More churn. Higher cost of customer acquisition. Ma and Pa Bell already saw this small business broadband and voice. Then they lost the consumer broadband and voice market. Now the cellular market is up for grabs.
Verizon is looking at buying Charter now. Rumor has Comcast looking at buying its 4G backup partner, T-Mobile. The cablecos denied cord cutting until it was too late. Telcos denied cable competition until it was too late. There really aren't any visionary CEOs in our space.
The problem remains the same: at some point you have to be make money, not just on paper.
Debt payments, network CAPEX, stock dividends, payroll and pension liabilities are a burden to ILECs - all of them: Frontier, AT&T, Verizon, CenturyLink, even Windstream and Fairpoint (who sold out to Consolidated).
Revenue is getting crushed as the cost of bandwidth, transport and transit collapse. Voice revenue has declined. Text revenue is flat. OTT apps have taken video calls (Skype, Facetime), some voice calling (Messenger, WhatsApp), SMS/MMS. What's left? The Enterprise market and the Government market.
What happens when there are just 4 carriers? Is the channel necessary to sell monopoly services? Well, see.
Some other points:
With subsidized phones gone, how will that affect phone makers long term? Will we see the leaps in tech that we have so far? Unlikely. Google Pixel at $649. The iPhone 7 is $700. Not that many folks are going to drop that cash every 18 months to two years. (Note to self: Get in the smartphone/device insurance business!)
When will the next highly desired device come along to prompt an exclusive carrier deal (a la AT&T and the original iPhone) to drive signups?
Even Sprint is Buying into the business of streaming media with a $200M investment into Tidal, another money losing music streaming service.
As someone at lunch pointed out, many foreign LECs like Vodafone, BT, Telstra, even NTT, are sitting on tens of billions in cash. They could buy into the US market.
We sit at the nexus point of some interesting times.
Did you notice that UCaaS consolidation halted? Yeah, me too.
]]>Verizon over the last 7 years has sold off three chunks of its wireline business to Frontier, Fairpoint and Frontier. Did they need the money to buy all the spectrum that they have been hoarding?
They had Verizon Business (VZB) up for sale. That old MCI division. Then they bought XO, supposedly for the access to spectrum leases.
VZW was even the cheerleader for 5G, saying that it would replace wireline broadband. (Others ask that question HERE).
Maybe it is merger mania consuming Lowell (VZ CEO). Maybe he wants to invest in Liberty Media now that they own Live Nation, Formula 1, the Braves, SiriusXM, and more. "The Formula One Group consists of Liberty Media Corporation's subsidiary Formula 1, its interest in Live Nation Entertainment, Inc., other minority investments, including Time Warner Inc. and Viacom Inc., and an inter-group interest in the Braves Group." With $115 Billion in debt at approximately 5%, VZ is using up cash to pay $6B in interest payments per year. Maybe they want a good investment that will bring in more than 7% annually (and Yahoo and AOL just won't cut it).
We'll see. Who knows anymore? The M&A is coming faster than anyone can keep track.
]]>"Put it all together and you can see a day when you're watching content that Google produced disseminated via infrastructure that Google owns on a phone that Google made using wireless service Google brokered." Amazon tried it and failed. Google's phones are nice, but the Fi service has done about as well as Google Fiber.
The opposition - the cellcos, the RBOCs, the ILECs - don't want to be just dumb pipes. That's why Comcast owns NBCU; AT&T is buying TimeWarner; and Verizon owns AOL and is buying Yahoo. They want to own the whole OSI stack - Layer 1 to 7 - the walled garden that was AOL.
Facebook wants the same thing. Amazon, Microsoft and Google, too. Live in their ecosystem, where they collect as much data as possible to target you better to sell you more.
Amazon is selling ISP service, as a retail channel for Comcast and Frontier, not as a virtual network operator.
Meanwhile, a bunch of articles over the last two weeks talked about the ILECs lack of investment in broadband. Cable Will Keep Ruling US Broadband.
LightReading states, "All seven of the top MSOs registered broadband subs gains in the summer quarter. Over the past year, the cable companies have added more than 3.5 million data customers. Once again in contrast, five of the seven leading telcos lost broadband subscribers overall in the third quarter as they focused mainly on upgrading their DSL customers to fiber lines, not bringing on new customers." Once again telcos are late to the game - in TV and in competing against DOCSIS. Telcos were even late to get in the DSL game, afraid of losing T1 business. They have always had short term thinking.
"More than 80 service providers have opted out of participation in the Lifeline broadband program for at least part of their territories," writes Telecompetitor. Verizon, AT&T, Cox, Windstream, Charter, CenturyLink, FairPoint and Frontier have all opted out to the FCC. Part of it is "rural carrier stand-alone broadband pricing"; and part is the 10MB x 1MB requirement which DSL can't meet.
Meanwhile, telcos have to re-think their TV strategy in the wake of OTT video. A consortium of them should buy DISH Network and its Sling TV.
After Google Fiber's debacle in 2016, all providers will re-evaluate fixed wireless instead of a wired strategy.
Maybe g.fast makes its way past some trials in 2017.
Will Comcast, Charter or Google become the number 4 cellular provider in 2017 after AT&T, VZW and a combo of T-Mobile+Sprint.
FiberLight, LUMOS, Sprint wireline, Fatbeam, Wilcon, Towerstream, and some others will likely be part of some M&A this year. No one saw Fairpoint getting picked off by Consolidated - or the pending Level3+CenturyLink disaster.
Another year of turmoil coming at you! With a new FCC.
One thing all this says: we don't know what will disrupt in 2017.
]]>Telcos spent billions on both fiber and TV services. [Verizon reportedly spent $23 billion rolling out FiOS since 2004, some of it from rate hikes, some from government subsidies.] Unfortunately, by the time telco TV, like Windstream's Kinetic, is widely available cord cutting is accelerating.
From DSLR, "Telco TV and satellite TV providers saw record pay TV subscriber losses last quarter, according to the latest analysis by Leichtman Research. According to Leichtman, the pay TV sector lost about 210,000 subscribers last quarter, though this figure is dramatically lower than the 430,000 subscriber net loss stated by Wall Street research firms like SNL Kagan. While traditional cable providers "only" saw a net loss of 90,000 video subscribers last quarter, the telcos were particularly hard hit, losing 375,000 video subscribers last quarter -- compared 45,000 during the same quarter last year."
In the broadband realm, "Cable companies added a net of 775,000 broadband subscribers last quarter, compared to a net loss of 150,000 broadband subscribers during the same period," writes DSLR. [see chart here]
For consumers, it is all about the Internet and smartphones, according to Pew.
Telcos didn't want to get into the DSL game. Mainly to protect a highly profitable T1 business. The same way they threw obstacles at Google Fiber, the LECs threw obstacles at the newly minted DLECs - NorthPoint, Rhythms and Covad. Sure, some of it was incompetence on the part of the DLECs and GF, but the hurdles kept tripping them up. After they all filed bankruptcy, the RBOCs decided to get into the DSL retil game, to the chagrin of the independent ISP, who was finally making money on DSL. Undercut by the vendor, many ISPs failed or limped along for years, which affected many small businesses as the ISP was usually the local computer expert and Internet Provider. This was something that the LEC could not provide: personal service to the small business. To this day, the Duopoly can only supply commodity service with almost non-existent support. As they have gotten bigger and bigger to take advantage of scale, the support to the small business has suffered.
Small business is 99% of the businesses in America. Yet every provider wants to go up market.
There are almost 28 million small businesses in the US and over 22 million are self employed with no additional payroll or employees (these are called nonemployers). Over 50% of the working population (120 million individuals) works in a small business. But it is under-served by the Duopoly.
From the FCC's 2016 Broadband Report:
Think about those numbers. VZ spent $23B. Other telcos spent billions. The FCC donated billions in BTOP, BIP, ARRA, CAF, CAF II and USF funds to the effort to build out broadband across America. Private companies (PCOs, ISPs, WISPs and CLECs) have invested hundreds of millions more. Cable dropped bilions. Yet not everyone has good Internet????Or a choice of more than 1 ISP?
I have to wonder where this goes. The telcos spent billions to get triple-play just as that bundle becomes undesirable. They now have to build out fiber to stop losing broadband subscribers, so more hundreds of millions. At a time when their debt is High - and the pies for TV, broadband and voice are stagnant. Even cellular has peaked.
They are all chasing Enterprise, which I imagine means 500+ employees. There are only 30K businesses in the US with more than 500 employees. So Comcast, Charter, AT&T, Verizon, CenturyLink and Windstream are fighting desperately over the same 30,000 businesses and government contracts. With VZ acquiring XO (approved today); C-Link acquiring Level3 (ugh); and WIND Buying EarthLink, that leaves Zayo as the sole big indie.
What happened? Bad short-term decisions that cost jobs, revenue losses and more CAPEX spending than if they had just done it from the beginning. To still see announcements from the telcos about Gigabit deployments in select cities is just plain sad. The monopolies that were the Bell companies re-constituted but lost their edge. It's like they don't know how to compete at all. They just lean on their brand and hope for the best.
EoC wasn't widely enough deployed and sold. Yet everyone is banking on SD-WAN, which will likely just make SLAs crumble.
Small business has suffered from this mess -- and further with the mega-mergers and consolidation. Small businesses - all businesses - rely on telecommunications to do business. The Internet is vital to our economy. Let's hope we don't stifle it anymore.
]]>If you can't see that flash mp3 player, you can download the mp3 or listen on Soundcloud.
]]>CenturyLink just sold off its data center business that was a combo of Qwest Cyber Centers and SAVVIS to a group of PE firms for $2.15B in cash and C-Link keeps a minority stake worth $150M in the new company. CL bought Savvis for $2.5B in 2011. Buy High; Sell Low. Bell-Head Mentality.
The PE coalition that bought the data centers also grabbed 4 cyber-security firms in order to announce this global security co, to be run by Manny Medina, former CEO of Terremark Worldwide.
Wired's headline says it best: The World's Telecoms Are Under Threat From All Sides.
Broadband, cellular and voice are all flat or declining markets.
IAAS and PAAS are ruled by Amazon, IBM and Google. Microsoft only got into the game recently and is doing better than all the telco's combined.
PE firms are buying up data centers as the world adjust to cloud computing, an app market and streaming TV and radio.
DDoS attacks are happening too often. So are Hacks. There are not enough fingers to fill all the holes in this dyke.
UCaaS is ruled by 8x8, Vonage Business, RingCentral, Fuze and a bunch of other providers that are not a telco. The PBX market may be shrinking but not fast enough for the other Hosted VoIP players. Cisco and Microsoft have chunks of the enterprise UCaaS business that the telcos don't.
Comcast Business is at $6B in annual revenue, which makes it a bigger CLEC than almost all that are left. WIND does $5B. EarthLink less than $1B. Birch and TelePacific are private. Level3 does $8B. CenturyLink does $17B (much of it ILEC revenue). Zayo is $2B.
Apps like Messenger, WhatsApp, Skype and Slack are replacing voice and SMS and even email. It is a topsy-turvy world. What's a telco to do? Well, merge! Get bigger because bigger solves nothing, but it makes money for top execs in the C-Suite and the Board room and on Wall Street.
Our economy spins on e-commerce and the Internet. When the companies that provide that Internet are too clunky to do it properly, what happens to our economy?
We went from a five nines voice network of reliability to cell phones and VoIP that quite frankly can't be more than three nines. Have you noticed the number of outages lately by telcos and cablecos?
There is a lot going on. There are many areas of opportunity, but the fall back from these guys is "more of the same", "do what I know" and "one more quarter!". None of these transactions is good for the industry, the economy or the consumers. They are stop gap, short term money movers. We are going to wake up shortly and realize that it is 1970 all over again. It makes the NSA job easier when there are few players, but what about the customers?
In the data center space, one master agency contacted me after the C-Link announcement to tell me that the folks at CenturyLink have no details about the sale. How can that be when Monroe has been trying to sell the DC division all year? Great planning, guys!
Whose customer is it? Will the agent still get paid? Will the customer see a price increase? Who is the billing entity? Who will the customer be paying? These are good questions that bothered some TELX customers when Digital Realty took over.
I keep seeing executives at master agencies say these deals are good. Do they say that in print because they have to?
Don't forget that you can leave a public comment with the FCC on any of these mergers. You can voice your opinion here. You will need a docket number but you can google it after the filings are in the system.
]]>Inteliquent was formerly known as Neutral Tandem, with an initial business plan to be an alternative tandem switching platform for CLECs and VoIP Providers. They re-branded after they bought Tinet adding network to their strong voice service. They sold Tinet to GTT in 2013 for about $55M. Inteliquent has been focused on voice and competing pretty well against both Level3 and Bandwidth.
"As the nation's highest quality provider of voice and messaging interconnection services, Inteliquent is used by nearly all national and regional wireless carriers, cable companies, and CLECs in the markets it serves, and its network carries approximately 21 billion minutes of traffic per month." They added some CPaaS capability as well. I have to wonder 21B in minutes and just $90M in annual revenue?
Zayo spun out its voice business as Onvoy. It was acquired by GTCR. Onvoy has acquired ANPI, Broadvox and Layered. Now it will combine Inteliquent into that mix.
These deals have made partners and customers nervous. The uncertainty seems to be a normal now.
These integrations are smooth and often have some customer facing problems. (See Frontier for how that works.) There is so much M&A that as a partner it is difficult to choose who to present to your client as a vendor.
]]>Level3 has a bad quarter financially and the C-Suite says, "Don't look here! Look over there!"
Also, bankers! Besides the C-Suite, Bankers are the only ones making money on these deals. So yeah that want more M&A - as overall M&A activity in 2016 is down. Truthfully, bankers have ruined telecom with all this M&A.
Yesterday I was at a TelAdvocate event in Tampa. No agent there thought it was a good idea. Emails from other agents are basically panic. We just got done with integration. Please not another one!!!
What do they get with this merger? Two very opposite cultures. One is mainly an RLEC. One is mainly a wholesaler. Not does that match up?
Level3 fiber is everywhere that Qwest is with its Genuity, Gobal Crossing and own long haul fiber. L3 could probably do a better job selling colocation and data center that C-Link.
The big picture is that you would have a larger telco with massive debt -- and declining revenue. Since CenturyLink has debt of around $20B with about $18B in revenue and Level 3 has debt of about $10B with $8B in annual revenue, the combined entity would have $26B in revenue and $30B in debt. Plus years of integration work, layoffs, confusion, and eventually lost revenue and a lousy organization.
As brokers of telecom, we want choice in the marketplace. This doesn't achieve that.
I am hoping this is just a banker balloon. Both stocks moved up, so maybe someone was just doing some day trading.
]]>