PAETEC CEO Chesonis to Opine on CLEC Resurgence Letterman-Style

Arunas Chesonis is the man of the hour. His company, 8-year-old PAETEC Communications (Booth 407), has just announced that it will acquire fellow CLEC US LEC, creating a billion-dollar Super Tier 2 provider, rivaling XO Communications Inc. (Booth 715) and the would-be combination of Time Warner Telecom Inc.-Xspedius, another recently announced CLEC deal.

Chesonis serves as chairman of the board and CEO for PAETEC and is responsible for the vision, leadership and direction of the company, which serves more than 17,000 U.S. business customers. He has been invited to address his peers at this weeks COMPTEL PLUS where he will talk about what he describes as the CLEC resurgence. Anyone who has weathered the storm and is focused on end customers, especially at the enterprise level, is going to do really well the next five to 10 years, Chesonis said, basing his comments on feedback from some 400 executives that sit on PAETECs customer advisory boards.

They are telling us they are struggling to find good vendors to do business with, [given] all the changing technologies that they need help with, he said. They cant hire enough people internally to support what their companies needs are. So, they are depending more and more on outside companies to advise them.

With this in mind, Chesonis said his keynote address will be an upbeat message on how COMPTEL members can improve on their customer relationships David Letterman-style. If you were a competitive telecom company today, what would be the top 10 things to focus on to be successful with your customers?

So, whats on this top 10 list? Chesonis offered a sneak peak at one item: Become a customers telecom expense manager. Most companies that we do business with dont really know how much money they are spending and if they are being appropriately invoiced, he said, noting that while auditing and TEM traditionally have been a focus for consultants, it really needs to be something that every carrier does.

Another item might be: Cooperate with other CLECs to deliver comprehensive coverage. Chesonis said CLECs are doing this more readily today than two years ago. They no longer are as concerned about enabling a competitor in their market.

While offering such advice to his peers may seem awkward on its face, Chesonis doesnt think it is. When you talk to your competition, whats the biggest market share chunk we are going to have collectively 4 or 5 percent? We are not the bad guys to one another. We are not the ones we have to worry about, he said.

The common competitors found in the Bell-IXC combinations will continue to be a driver for consolidation among CLECs, he said, noting that in the case of PAETECs pairing with US LEC, it was a consideration. US LEC came up after [PAETECs] recapitalization and it was a great opportunity to create a much larger company with the scale you need to compete with the bigger companies, he explained.

Combined, the company will have annual revenue of nearly $1 billion and nearly $190 million in earnings before interest, depreciation and amortization. The company hopes to save $25 million in costs in the first year after the merger closes.

He added that its anybodys guess how many competitive players will result. He left the door open on PAETECs future options. We are both growing combined in that 12 to 15 percent range, so we dont have to acquire other companies to continue to grow, but I think both companies have made acquisitions in the past and will look to be sort of opportunistic, he said.

PAETEC Communications


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