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Time Warner Closes Its Acquisition of Xspedius and Gains Key Metropolitan Network Facilities
| November 1, 2006 | Business Network Services - U.S. | Competitive Update
| Client Access |
Analyst: Cindy Whelan
Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderata
Event Summary
On October 31th Time Warner Telecom completed the acquisition of Xspedius Communications, an integrated communications services provider with a metro fiber presence, for a total of $576 million in cash and stock, consisting of $216 million in cash, 18.2 million Class A shares, and no assumption of debt. The acquisition enhances Time Warner Telecom’s ability to provide last-mile connectivity to enterprise customers, offering it the opportunity to expand its growth in this market segment.
Analytical Summary
• Current Perspective: Positive on Time Warner Telecom’s completion of its acquisition of Xspedius Communications. Time Warner Telecom operates 7,015 route-miles of regional fiber and 13,589 route-miles of metro fiber in 44 metro markets, and Xspedius operates 2,800 route-miles of metro fiber in 36 markets. Only 12 markets overlap between the companies, and the acquisition of Xspedius’ metro fiber presence will enable Time Warner Telecom to enhance services that it currently offers to its enterprise customers.
• Vendor Importance: High to Time Warner Telecom, because this acquisition adds metro fiber coverage in 31 new markets, including the major metropolitan areas of Washington, D.C., Baltimore, MD, and Miami, FL. Time Warner Telecom now has access to over 60% of U.S. businesses located within its footprint, and 20% of these businesses are within one mile from a Time Warner Telecom network. In addition, the $230-$250 million in revenue that Xspedius is expected to bring Time Warner Telecom pushes the carrier closer to $1 billion in annual revenues.
• Market Impact: Moderate on the business network services market, because Xspedius is bringing Time Warner services into 31 new markets, but many of these markets are adjacent to existing Time Warner Telecom markets and do not bring the carrier into completely new regions. Xspedius’ sweet spot was integrated T1 services, which Time Warner Telecom already targeted via its VersiPak service.
Recommended Competitor Actions
• Level 3 can emphasize that its new Metro Services business will cover more markets and have nearly twice the amount of metro fiber that Time Warner Telecom has after the merger.
• Other CLECs can focus on uncertainties that accompany corporate mergers and product integration. CLECs that target SMBs can position Time Warner Telecom as a company with a first priority of serving large enterprises and imply that the carrier will not expend much time or money in developing services and bundles for SMBs.
• Time Warner Telecom is the latest carrier to announce the acquisition of another company, and it will be working to integrate people and services. CLECs that are not in the midst of an acquisition or integration can emphasize their stability over carriers that are experiencing the disruption of an acquisition and integration.
• Cable TV providers offering business services can step into the breach and point out that they also operate large fiber footprints, complete with the availability of sophisticated voice and data services. Though cable TV providers tend to lack T1-based services, they can trade off their broadband portfolio to compensate for SMB connectivity back to customers' headquarters locations served by their access fiber footprint.
Purchase Full Report Online
Report Title: Time Warner Closes Its Acquisition of Xspedius and Gains Key Metropolitan Network Facilities
Publication Date: November 8, 2006
Report ID: CurrentAnalysis-CIR23649
Pages: 4
Price: $249 U.S.
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Business Network Services - U.S.
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