COMPTEL PLUS — Panelists participating on a panel at the COMPTEL PLUS Fall Conference in Orlando this week believe the environment for mergers and acquisitions will get stronger next year or the year after, and that it will be good for the market as long as there is no repeat of irrational exuberance.
The panel, “Mergers & Acquisitions: How Do They Impact Supply and Demand in Telecom," moderated by Kelly Teal, business and regulatory editor for the Telecom Division of Virgo Publishing, included: Dan Caruso, president and CEO of Zayo Bandwidth; Joe Morris, chief operating officer of First Communications; Roger Valdovinos, founder and managing director of Blue Beacon Capital and Ed Vilandrie, director and co-founder of Altman Vilandrie & Company.
Starting from the standpoint that supply and demand for bandwidth are once again in balance and demand is back on the rise, panelists examined the effects of that on further consolidation in the carrier marketplace.
Caruso noted that since 2007 there have been approximately 15 acquisitions of fiber-based telecom companies and that there are only 15 competitive carriers left in the U.S. with at least five thousand route miles of fiber and $75 million in revenue. “Over the next three to five years, there will be another wave of consolidation. The big guys will get together and the number will drop to less than ten,” he said.
Vilandrie said that a lot of the M&A activity that should have happened before the bubble, will start happening in the next six months to a year. A second phase will follow that where companies start going after properties they lack, such as cable companies buying competitive local exchange carriers (CLECs) that are good at selling up-market. A third phase, not necessarily following but potentially in tandem to a degree, will be a rush to fill the “sensational need for bandwidth.”
“There is a huge gap in the network infrastructure that will be required to support what is going on in the wireline and wireless networks,” Vilandrie said.
While those with cash might be tempted to get while the getting is good at the first whiff that the recovery is real, Caruso cautions them to consult their short-term memory. “We lived through the telecom ‘hellcom’ and as investors and operators, we made a mess of our industry and we are capable of doing it again,” he said. “With bandwidth growing as it is, there will be a lot of temptation to spend and raise money like we did before. We have to make sure that as participants in this industry we have reflected on what happened during the telecom meltdown and not make that mistake again.”
