Verizon’s announcement last week that it would pay $1.8 billion for the optic fiber assets of XO Communications and save $1.5 billion had some scratching their heads. They had to be something more to the deal then that. If you hear what Verizon EVP/Wireless Operations had to say at the Jefferies Media & Communications Conference on February 24, 2016, it gives the deal more perspective. According to marketrealist.com, Small told the conference “I’m very excited about what we’re doing with XO. Because when you think about fiber density and you think about a particular geography, you need far more robust fiber assets.” He also said, “But when you think about cell splits and you think about existing macro towers, having more assets upon which to light up macro cells with our own fiber versus somebody else’s fiber is a good thing to have. Having that fiber density for build-out of small cells is also incredibly important to us.”
Verizon also expects XO’s Ethernet and its IP networks to improve the carrier’s overall service proposition, and the deal reportedly will give Verizon the option of picking up XO’s spectrum, too.
And the fast-growing industry’s appetite being what it is, Verizon’s acquisition of the fiber provider might not hurt other fiber competitors but instead create more opportunities for Level 3 Communications and Zayo Group, theorizes one Wall Street analyst. The XO deal gives Verizon metro networks in 40 major U.S. Markets, points out Fiercewireless. That’s more than 4,000 on-net buildings and 1.2 million fiber miles. The intercity network also spans 20,000 route miles connecting 85 cities. Why more opportunities? XO’s network size pales in comparison to its competitors and there are plenty of opportunities for other players to compete for their business figures the analyst.
Verizon expects the XO deal to close during the first half of 2017.
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