WALL STREET LAST SAW
a flood of IPOs from competitive carriers just before the telecom industry went bust. Now, as more CLECs wean themselves off UNE-P, specialize in IP services and bring their balance sheets into the black, the question arises: who will go public?Continued merger activity will pave the way for more CLECs to go public, and in a more favorable environment than six or eight years ago, predicts Rick Smith, president and CEO of Eschelon Telecom Inc. Eschelon was one of two CLECs to go public last year and is a company known for buying smaller, profitable providers in markets it already serves. Smith says investors are becoming more bullish on the competitive industry, and they’re showing that confidence by backing facilities-based CLECs with millions of dollars.
The year 2005 also was good to VoIP provider Cbeyond Communications Inc., although it wasn’t to all carriers seeking IPOs. PAETEC Communications Inc., for one, abandoned its bid, citing lower-than-expected prices. Still, the company has gotten its go-public wish after successfully wooing publicly held US LEC late this summer. Together the companies will form the so-called “New PAETEC” and trade on the NASDAQ Stock Market under US LEC’s familiar ticker, “CLEC.” Being public “will allow us greater financial flexibility to be able to continue to invest both in network and product development, and future geographies,” says PAETEC CFO Keith Wilson.
Other carriers are waiting to see what the market holds before they approach Wall Street. In January, TelePacific executives told agents it intended to do an IPO after surpassing 500,000 access lines. But, says Ken Bisnoff, senior vice president of strategic opportunities for TelePacific, there is nothing official he can discuss. “Our plan is to continue to grow and gain scale, and if it makes sense at the time and works from an investor standpoint, we would consider it,” he says.
Indeed, IPOs are always an option for companies, says One Communications’ Ray Allieri, president of business services. “The way we view it is, you build your company for the long run and, as opportunities present themselves, decide if it’s the right opportunity for you.”
For some, it’s a “too soon to tell” situation. “To be fair, so many companies just turned the corner over the past couple of years that the track record is just starting to come together,” says PAETEC’s Wilson.
“What’s not going to happen,” chimes in InfoHighway Communications Corp.’s president and CEO Raul Martynek, “is a lot of ‘me too’ IPOs, which is what happened in the bubble days.” Now, investors are more sophisticated and ask a lot of hard questions, he says. So, instead of a rush of IPOs, he foresees continued consolidation and expects some of the public CLECs to buy larger, private CLECs.
Regardless of how it comes about, Eschelon’s Smith is hoping for more debuts on Wall Street. “I really want more high-quality CLECs to do IPOs because we tend to trade at the bottom range,” he explains. “The more CLECs who go public, actually helps the ones who are already public. It actually helps the entire industry.”
| Links |
| Cbeyond Communications Inc. www.cbeyond.net Eschelon Telecom Inc. www.eschelon.com InfoHighway Communications www.infohighway.com One Communications www.onecommunications.com PAETEC Communications Inc. www.paetec.com US LEC www.uslec.com |
