What is Verizon Doing?

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

What is Verizon Doing?

After the rumors a couple of weeks ago that were covered by me, Rich Tehrani, TMC's TechZone and Ramblings, Verizon put an offer on a slightly used CLEC with fiber and spectrum for $1.8 Billion. VZ will be buying it directly from Carl Icahn who owns XO. VZ might not be able to take ownership for 2017 due to approvals needed.

According to Bloomberg, "Verizon Communications Inc. agreed to buy fiber-optic networks from Carl Icahn's XO Communications LLC and lease spectrum for about $1.8 billion, giving the nation's largest wireless carrier more Internet bandwidth for corporate clients and airwaves to test faster wireless technology."

The Synergies will likely be a RIF of most of the 2800 employees left at XO, which will be a rounding error for Verizon Communications Inc. and its workforce of 177,700. Last reported income from XO was in $1.4B in 2011. Even if XO was still bringing that in - which they are not! - it is about 1% of VZ's 2015 revenuesof $135B.

Hard to make the revenue needle move much at $135B!

XO has been a mess for a long time, mainly because its owner since 2011, Carl Icahn at XO Holdings, hasn't done much with it but cut employees and spending. XO started in 2000 as a merger between NextLink and Concentric Hosting. Later XO acquired Allegiance Telecom in 2004 after recovering from a 2002 bankruptcy.

I wonder if the Broadsoft, UC and cloud business goes with the fiber. XO has 2 million SIP trunks, but all the press releases read fiber-optic business. That might be in keeping with the theme for Verizon - fiber-optic! Cut all ties with copper and just be fiber and cellular.

Also, the wording of the press release appears like an asset sale not a purchase of XO Holdings.

"Separately, Verizon will simultaneously lease available XO wireless spectrum, with an option to buy XO's entity that holds its spectrum by year-end 2018." [pr]

"XO holds 102 licenses to spectrum in the 28 gigahertz and 39 gigahertz range, which cover about 45 percent of the U.S., according to Bob Varettoni, a Verizon spokesman." [Bloomberg]

The XO fiber allows VZW to backhaul the small cells needed for a denser network for both 4G and the soon to be trialing 5G cellular networks.

Right now, Verizon is shutting down its public cloud infrastructure - and giving customers just two months to move! according to DCK. It is exiting competing against the computing giants of Microsoft, Amazon and Google. It will be keeping its private hosting/cloud - and no sale of its data center business formerly known as Terremark has been announced yet. (I would have thought that the data center business would have been sold to buy XO, since VZ already is soaked with debt.)

On the ILEC side, the sale of Cali, Texas and Florida ILEC assets to Frontier has not been approved yet. On other fronts, VZT is making the move to retire copper as fast as it can despite opposition from the CWA, consumers, CLECs and state agencies. The opposition to copper replacement comes from the Super Storm Sandy mess, when all the networks were down. Also, as copper is retired, CWA loses power and head count and CLECs lose access to customers, except through more expensive means like cable and ILEC fiber.

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