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Interoute Buys Euro Network

Pan-European operator Interoute Telecommunications has confirmed its acquisition of East European carrier Central European Communications Holdings BV (Cecom), a deal flagged by Light Reading several weeks ago (see Interoute to Buy Euro Carrier and Interoute Buys Cecom).

The deal gives the privately held operator a network with customers in 11 cities in Central and Eastern Europe, a region that is expected to experience significant growth in communications services, particularly following the recent expansion of the European Union.

Interoute isn't revealing the deal's value but claims it picked up the operator for less than 10 percent of the amount invested in Cecom's network. Nick McMenemy, Interoute's head of strategy and business-critical operations, says the operator funded the acquisition from its current cashflow but that it "wasn't a giveaway."

But given that McMenemy admits the deal's value is much less than $50 million, it means Interoute has picked up a network of between 2,000 and 3,000 kilometers in Europe's key growth region for a bargain price, something Interoute has managed in the past (see Interoute Acquires Ebone).

McMenemy adds that Interoute has an M&A warchest ready to go after other targets of greater value and market presence, and that the carrier hopes to close some significant deals in the near future.

The Cecom deal gives Interoute a new operations center in Prague, nearly 30 new staff, and a broad range of wholesale and enterprise customers, including many of Europe's national incumbent carriers as well as regional operators and ISPs. McMenemy says there's hardly any overlap in terms of network, and that there are no plans to close down the Prague NOC because "Cecom's customers like to have access to an operations center that's in the same region." Interoute already has NOCs in London and Amsterdam.

Yankee Group analyst Camille Mendler says the deal makes a lot of sense for the growing operator. "This is a key development for Interoute and is about more than just buying network footprint. It's about what you can offer on top of that network," she says, noting that the Central and East European region is an alternative location to India for companies looking for outsourced call center facilities and software development, all of which requires reliable high-speed network connectivity. "This matches Interoute's long-term plan to provide services to enterprise customers."

McMenemy says that trend to relocate to Central and Eastern Europe has already begun, and that Cecom recently signed up two major European car manufacturers that are relocating production plants to the region.

The Cecom acquisition is just the latest in a string of announcements from Interoute, which is looking to expand and launch new services, such as Ethernet access and VOIP, as quickly as possible and get a few steps ahead of its European cross-border rivals (see Interoute Rides Europe's VOIP Wave , Interoute Teams With T-Systems, Europeans Go Crazy for Ethernet Services, and Interoute Boosts Staff by 20%).

— Ray Le Maistre, International Editor, Boardwatch

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