Broadview Networks Inc., a competitive carrier in New York, has filed to raise up to $287.5 million in an IPO.
That number could change, though, as Broadview didnt say how many shares it expects to offer or at what price. The company plans to trade on the Nasdaq under a yet-undetermined ticker symbol and use the IPO proceeds for capital expenditure, acquisitions and investments.
The move isnt surprising. In 2006, Broadview bought voice and data service provider ATX. Then, earlier this year, Broadview purchased InfoHighway Communications Corp., creating a $500 million CLEC to compete against the likes of PAETEC and One Communications Corp. Such acquisitions generally signal focus on new strategies, like going public, and 2007 has been a good year for telecom companies wanting to woo Wall Street.
So, Broadviews executive team, led by President and CEO Michael Robinson, must be confident, despite a bipolar stock market. Fraught with worries about housing, oil prices, a credit crunch and recession, yet encouraged by some positive economic activity, Wall Street alternately has dipped and soared for about the past month. The ups-and-downs havent been too hard on some of Broadviews CLEC rivals, however, and that could be contributing to the companys decision to do an IPO now.
For example, PAETEC stocks were trading for $10.68 on Friday. That was about the mid-point between the companys year-high and low prices of $20.40 and $7.97, respectively. Cbeyond Communications Inc. remained one of the industrys brightest stars. It has performed well ever since going public in 2005. On Friday afternoon, Cbeyond stock was selling for $41.50, close to its 52-week high of $44.71.
Broadview didnt indicate in its SEC filing why its eyeing an IPO in the current market, but one reason could be its growing sales. The company recorded $326 million in revenue for the nine months ended Sept. 30, it told the SEC. That was almost double from the same period a year ago.
Still, Broadview faces some high risks as a public company.
For one, it has substantial net losses and doesnt expect improvement for the foreseeable future, it said. By Sept. 30, net losses totaled $45.6 million. Thats compared to $17.7 million in 2004; $38.9 million in 2005; and $41.5 million in 2006, Broadview told the SEC.
Theres also the chance that Broadview will have to pay more to interconnect with its ILEC suppliers if those carriers keep getting regulatory relief through forbearance petitions. If that happens, Broadview will have to pass on costs to customers and probably go deeper in debt to keep building its own network, the company said.
To be sure, forbearance is one of the biggest threats to Broadview. Verizon Communications Inc. is asking the FCC for widespread unbundling relief in six northeastern markets and Broadview relies on Verizon lines in three of those regions Boston, New York/New Jersey and Philadelphia. The CLEC fears ratcheted access prices if the FCC grants Verizons request next week. The FCC must act by Dec. 5 or the petition automatically will go into effect, as happened in March 2006.
Broadview also is worried about copper loop retirement. CLECs use those loops to deliver DSL, Ethernet and other services to customers, and the Bells are working to replace many of those resources with digital loop carriers and fiber-optic cable. CLECs say that would relegate them to using slower, more expensive DS0s and DS1s. The FCC has yet to institute a review process to determine the conditions under which RBOCs can retire their copper loops.
But Broadview is counteracting those risks with strengths it hopes will make for an attractive IPO. The CLEC is one of several in a consolidating market that targets SMBs, a niche the Bells tend to overlook or serve poorly. Broadview intends to make the most of this lack of focus, which has created an increased demand for alternatives in the small and medium-sized business communications market, Broadview wrote in its SEC filing. Consequently, we view the market as a sustainable growth opportunity and have therefore focused our strategies on providing small and medium-sized businesses with a competitive communications solution.
Deutsche Bank Securities and Jefferies & Co. are underwriting Broadviews IPO.
Broadview Networks Inc. www.broadviewnet.com
Cbeyond Communications Inc. www.cbeyond.com
One Communications Corp. www.onecommunications.com
Verizon Communications Inc. www.verizon.com
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May 24 2019 @ 15:22:08 UTC