Wireless Combo is Merger 3

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

Wireless Combo is Merger 3

This week has been awash with mergers - the Intel-McAfee merger and the Windstream-Q-Comm merger are the big two. The third interesting merger involves two fixed wireless companies. Airband and Sparkplug announced that they merged and grabbed $20M in financing.

"Fixed-wireless companies Airband Communications and Sparkplug Communications today announced they have merged, creating the largest fixed-wireless company for businesses in the U.S., providing a full suite of voice and data services in 17 markets."

Airband has had its ups-and-downs. It was heavy with Broadwing execs for a while there. It was striving to build an indirect sales channel, but it let some channel managers go a couple of years ago and fell off my radar. I wasn't aware that they were doing Hosted PBX or SIP Trunking.

Sparkplug had some executive changes the beginning of the year. Maybe to make way for this merger. Most fixed wireless mergers don't work well. The roll-ups fall apart. A couple of mergers have worked out, but nothing of this magnitude. Wireless is a labor intensive and detail oriented business. It's not something that is just build it and poof! 

Reading Rob Powell's take on the Windstream merger is interesting how most folks just talk about the finances.  I get the finances are important for the bankers and The Street who drive these mergers. Bankers like to get paid to "create value", which they hardly ever do. Some of those 600 employees are certainly going to be let go. That's the big synergy with these mergers. Get payroll and benefits costs down and work on where else you can eliminate costs. Usually you also eliminate domain knowledge and customer service, but what the heck that bar is pretty low in America any way.

The 5500 SMB customers that they grabbed from KDL/Norlight generated $58M in revenue. That's like $3525 per month per customer, but I think we should point out that KDL, at least in KY, is the main fiber provider, selling to ILECs and MSO's. And Windstream obviously wants to keep that stream running, and hopefully add wireless backhaul.

Everyone is hoping that cellular companies will pay them a fortune for wireless backhaul fiber. (It's the whole premise behind Allied Fiber).  I just don't know how that will play out. I understand the need for fiber to the tower. I just don't see cellcos paying a small fortune for it, especially long-term. Remember who owns the cellcos: ILEC's. They like to own their pipes.

I have to wonder how much more debt the whole telecom industry can take. It's not like the telecom spending is going up enough to cover all of it. Wireline voice revenue is shrinking. TDM revenue will start declining.  Windstream is banking on keeping against other ILEC's for SMB customers -- a take-away game.

It's hyper-competitive and leveraged to the hilt. I smell bubble gum.

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