Agents told PHONE+ they are optimistic about the potential for the planned merger of Speakeasy with Covad Communications Co. and MegaPath Inc. – a combo that creates a stronger company in terms of scale, product breadth and channel-friendliness.
The transaction, announced June 10, will combine Speakeasy’s small business voice and data services with MegaPath’s services for distributed enterprises, and make them available over Covad’s nationwide broadband network. The combined privately-held company is expected to have annual revenues greater than $500 million.
“The [deal] is welcome news for Telarus, and I think all agents in the channel,” said Patrick Oborn, vice president of marketing for master agency Telarus Inc., which represents both Covad and MegaPath. “Now, with one contract, agents will have access to Speakeasy's great access and hosted VoIP products, Covad's huge footprint and MegaPath's superior managed network.”
He said each company fills an important niche for agents selling IP communications and access solutions.
“Most importantly, it allows agents to sleep at night knowing that the financial stability of three huge carriers just got a bit more solid,” he added.
Greater scale – a stated objective for the merger – is appreciated by the agents. “I think it makes sense for these companies to merge to leverage a greater footprint and buying power to survive,” said Cameron Larson, principal for Astound Communications.
Many agents' reaction to the news was to ask, who is next to join the threesome? Wild speculation among agents ranged from New Edge Networks to XO Communications Inc.
In fact, the merged company does have plans to grow organically and by acquisition. Dan Foster, chief sales and marketing officer for MegaPath, said, at more than $500 million – $310 from Covad, $150 from MegaPath and the rest from Speakeasy – the merged entity is on its way toward its goal of exceeding $1 billion. There it will join CLECs, such as XO, PAETEC, and Level 3 Communications Inc.
For agents, the increased scale is only matched in importance by the channel-friendliness of the new service provider.
“Although we've never worked with Speakeasy, we've been very happy with MegaPath and Covad in the past, and expect Dan Foster to cobble together a ‘Mega-Program’ for agents that combines the best practices of all three,” said Telarus’ Oborn.
Foster told PHONE+ more details about the combined channel will come following the deal’s close, which is expected in third quarter. However, he said, the plan is for the indirect sales channel to contribute 30-40 percent of the company’s revenue.
