EarthLink Back in the Game, Buys ITC
The race to add scale in the US competitive carrier space continues. EarthLink Inc. (Nasdaq: ELNK) today announced an agreement to buy ITC^DeltaCom Inc. (Nasdaq: ITCD) for $516 million or $3 a share, and will integrate ITC's 14-state fiber optic network, focused in the southeastern US, into EarthLink's national ISP network.
The deal is the latest in a series of consolidations within the competitive carrier space and it shows new signs of life from EarthLink, which once had bold ambitions that included an investment in wireless operator Helio and a major municipal broadband initiative, both of which were terminated. (See EarthLink Cutting Wireless? and Virgin Mobile to Acquire Helio.)
The deal creates a national company with a heavy anchor in the Southeast, says Ed Gubbins, senior analyst with New Paradigm Resources Group.
“The combined company will have an interesting, asymmetrical structure -- nationwide in scope (thanks to EarthLink’s acquisition of NewEdge) but far denser in the Southeast," Gubbins says. "That will be helpful in competing for medium-sized business customers against the cable companies, which don’t have that nationwide footprint, and in winning large enterprises based in the Southeast that have locations in other markets.”
The combined company will offer Internet services, which have always been EarthLink's bread and butter, but also telecom and managed services, which EarthLink offers through NewEdge and ITC offers as well.
EarthLink chairman and CEO Rolla P. Huff, in a prepared statement, said: “The capabilities we acquire with this acquisition will be complemented by our existing New Edge Networks business as we combine our nationwide MPLS network capabilities with Deltacom’s state-of-the-art infrastructure."
EarthLink is promising to expand communications offerings from ITC's portfolio into its other service areas, to create a broader portfolio. The new company will be headquartered in Atlanta. As part of the deal, EarthLink also takes on $325 million in ITC debt.
— Carol Wilson, Chief Editor, Events, Light Reading