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Zayo's Fiber Diet

Ray Le Maistre
8/1/2013

One of the major questions in Europe right now is about the timing of the inevitable market consolidation process that needs to take place in the region's communications networks sector. There are just too many networks, too many operators. That's why there are so many network-sharing deals being struck these days, but those deals are just the appetizers before the main course of takeovers.

Not surprisingly, most of the telco M&A debate centers around mobile. But there is another intriguing consolidation play waiting to happen and that involves Europe's fiber transport network infrastructure. And after an extraordinary acquisition spree in the U.S., wholesale and business data services specialist Zayo Group Inc. might just be about ready to sweep up some more fiber to add to the European assets it brought on board when it acquired AboveNet. (See Zayo Continues Buying Binge With First Telecom and AboveNet Finds $2.2B Buyer in Zayo Group.)

There's certainly no shortage of confidence among the Zayo team members I met in London recently, who hinted strongly that acquisitions figure in the operator's European gameplan. Glenn Russo, executive VP with responsibility for strategy and development, noted that AboveNet was Zayo's "first dip" into Europe and that the company was "looking around" to see if there are any other good targets.

But it's not just looking for fiber. "We buy companies, not 'assets,' and we certainly don't buy distressed assets. We look for a good business that has assets as a base. We would entertain acquisition possibilities."

So which companies are on its radar? How about euNetworks Group Ltd.? Some industry sources have suggested that would be a natural target for Zayo, but Russo declined to comment, other than to say that the euNetworks team is "a good bunch of guys – we have a similar business model." (See HFN Reaches Europe With euNetworks.)

Alastair Kane, VP of Europe, says there are between 10 and 20 operators around Europe that could interest Zayo, "from large to small. We're not looking for a specific target, we're looking for value."

That puts a number of companies in that broad potential target zone, from Interoute Communications Ltd., if Zayo got really ambitious in Europe, to GTS Central Europe and Digiweb Ltd., which recently integrated Viatel and its VTL Wavenet operation.

In the meantime, Kane is looking for ways to make Zayo/AboveNet a player in the U.K. mobile backhaul services market as the 4G market takes off. "We have a strong network in London and will look to push the network out [beyond the capital] when needed. AboveNet didn't have much of a carrier customer focus but we're pushing that now."

It'll do well to win backhaul business in a market that already looks largely wrapped up by BT Group plc and Virgin Media Business, but the Zayo team believes it can find a place in that market. "We're still learning about the mobile infrastructure opportunities," notes President of Group Sales David Howson, adding that "crumbs off the [U.K. backhaul] table aren't such bad crumbs to be picking up."

— Ray Le Maistre, Editor-in-Chief, Light Reading

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Ray Le Maistre
Ray Le Maistre
8/2/2013 | 6:24:52 AM
re: Zayo's Fiber Diet
The AboveNet acquisition didn't cause great upset in the European landscape but another regional acquisition could really shake things up. With the data traffic hubs of London, Amsterdam and Frankfurt, increasing volumes of traffic going to and from Asia-Pac and the growing need for low latency, high-speed connectivity to 4G RAN and data centers there's good volume business to be had.
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