Verizon to buy XO Communications fiber-optic network assets
Verizon Communications Inc. (NYSE, NASDAQ: VZ) has agreed to acquire the fiber-optic network business of XO Communications for approximately $1.8 billion. Verizon expects the purchase to improve its ability to service enterprise and wholesale customers as well as support its growing cellular operations.
The two companies expect the deal to close in the first half of 2017, subject to regulatory approval. XO will continue to operate independently until that time.
Verizon will gain access to XO's fiber-based IP and Ethernet networks (see, for example, "XO Communications plans fiber network expansion" and "XO Communications offers bandwidth-on-demand"). The company says it also has reached a deal to lease available XO wireless spectrum, with an option to buy that spectrum by the end of 2018.
The Tier 1 service provider also expects what it described as "several financial benefits" from the deal. These include a step-up in the basis of the assets as well as operating and capital expense savings. Verizon says the net present value of the operational synergies is expected to be greater than $1.5 billion.
Well-known investor Carl C. Icahn, chairman and sole shareholder of XO Holdings, sounded more resigned than thrilled at the deal. "Although this sale to Verizon does not represent a significant annualized return on our investment, we believe that in today's environment it does represent the best achievable outcome for the company's customers, employees and owner," he said in a press statement.
Icahn noted that he began purchasing the senior debt of XO in 2001 and the company filed for bankruptcy the following year. It emerged from bankruptcy in 2003 but subsequently required periodic capital injections.
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Stephen Hardy | Editorial Director and Associate Publisher
Stephen Hardy has covered fiber optics for more than 15 years, and communications and technology for more than 30 years. He is responsible for establishing and executing Lightwave's editorial strategy across its digital magazine, website, newsletters, research and other information products. He has won multiple awards for his writing.
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