XO: Selling Not in the Cards

On the same day Level 3 Communications Inc. committed to buying Broadwing Corp., XO Holdings Inc. said it will not sell its wireline division. For now.

Industry experts have speculated for several months Level 3 would buy XO Communications.

In August, Current Analysis Inc. analyst Brian Washburn told xchange magazine that XO Holdings Chairman and Director Carl Icahn has been trying to shop XO around forever. XO had been reviewing its so-called strategic alternatives since March, the same month it reneged on a decision to sell its wireline division to Icahns company, Elk Associates LLC, which already owns a majority portion of XO Communications.

But, instead of selling XO Communications, XO Holdings now plans to look into renegotiating or financing its credit facility, combining with another company, and/or raising capital by offering debt, equity securities or both. The carrier said it wants to keep focusing on its core businesses so it can maximize shareholder value. In a press release, XO said it had sought to sell its wireline business, but said credible offers that would have benefited shareholders did not materialize.

Underscoring its decision not to sell the wireline company, XO has introduced two new units, one for business services and another for carrier services. XO Holdings now targets business and wholesale customers through its XO Business Services, XO Carrier Services and Nextlink divisions.

That XOs not selling announcement came on the same day as the Level 3-Broadwing deal struck some as significant. During a Tuesday conference call, Level 3 CEO James Crowe admitted that Level 3 had secured the Broadwing acquisition in a competitive bidding situation, Washburn noted. You can fill in the blanks in terms of what other entities might have been bidding on Broadwing. XO may have issued the press release to pre-empt an escalation in speculation to turn a phrase about the CLEC’s future , either in light of Level 3’s ongoing string of acquisitions or in light of any possible involvement in the discussion over Broadwing’s sale.

XO Communications spokesman Chad Couser said the company simply wanted to reiterate to our customers and employees that the best strategy is a continued focus on growing XO Communications, given recent industry rumors.

Washburn agreed. Some business customers, particularly the sorts of enterprise-class customers that XO is looking forward to bringing on board with its own, recently completed and lit nationwide fiber network, dislike having any measure of uncertainty. The press release may have aimed to settle any lingering questions about XO’s future, he said.

As for whats next for XO, Washburn praised the carriers VoIP strategy. He said the great-looking new services the company has been rolling out will help it succeed in getting the public dialogue away from speculation about the CLEC’s future and back toward its technology and services.

Current Analysis  

XO Holdings Inc.

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