ISP Earthlink Inc.s plans to buy CLEC ITC^Deltacom Inc. have raised more questions than answers about the fate of the indirect sales channels for Deltacom, which will become an Earthlink subsidiary, and New Edge Networks, another of the ISPs subsidiaries providing telecommunications services to the business market.
Earthlink announced Friday it would acquire ITC^DeltaCom in a purchase worth $3 per share, or $516 million. The transaction is expected to close in the fourth quarter of 2010 or the first quarter of 2011.
The deal appears to be primarily an infrastructure play for Earthlink, which gains a 16,400-mile fiber network in the deal to bolster its ISP business and complement New Edge Networks nationwide MPLS network. However, agents naturally are curious about whether Earthlink will combine Deltacom and New Edge Networks and, if so, whether their respective channels would merge.
Michele Sadwick, vice president of corporate communications for Earthlink, told PHONE+ that specifics are still being worked out.” However she also noted that the agent channel was important to New Edge Networks, and the company plans to continue its partnerships with agents. Specific details will be worked out through the integration planning process and will be available as we get closer to close,” she said.
Spokespeople for Deltacom referred press inquiries on the deal to Earthlink.
If the channels did come together, agents said it would benefit Deltacoms agents in that the claimed the New Edge partner program is more channel-friendly. [Deltacom] didnt have a great reputation to begin with because of chronic back-office issues, but when they attacked the agent channel recently they lost most of their credibility (and their agents) in the channel,” said one agent speaking on background. Deltacom was criticized for cutting agent contracts in December 2009, a move some suspected at the time was positioning the company for sale. Deltacom subsequently started an exclusive agent program in February that targeted VARs in its region.
From our perspective, we were very happy to hear about this purchase,” said Doug Turpin, CEO at master agency Venture Group Enterprises Inc., which is a New Edge agent but was unable to reach a contract agreement with Deltacom that didnt allow the CLEC to cancel commissions. I think there is a good chance that with a financially stable backer and new leadership they could roll out a channel program from New Edge as a combined entity that might open up a huge base of new business for the agent channel. The way they cut off hundreds of good agents without cause and cancelled paying their commissions obviously created an environment where few would want to partner with them. Now this may change, if they put in a different team and offer fair contract terms to agents or simply add this portfolio into the existing New Edge agreement.”
But the integration would not be easy due to the companies very different styles, said master agent Josh Anderson, CEO of Telephony Partners LLC, which represents both Deltacom and New Edge Networks. Their styles are different in ways youd probably expect given their business focuses,” he said. While Deltacom undoubtedly has a strong data network and great MPLS rates in the southeast, it seems like most of their business is smaller, transactional integrated Ts. NEN, on the other hand, really only gets attractive when youre looking at multiple sites that need unique private data offerings over a variety of connections.”
The transactional focus may be the reason for the success of Deltacoms exclusive agent program, which already has 100 partners, the company announced in Sept. 1.
Anderson added that from a network perspective, bringing the companies together would be a benefit to agents. I do think that the combination of Deltacoms strength in the southeast with NewEdges network could make for some interesting product opportunities. I dont know if Earthlink plans to let those two companies leverage each others networks and, if they do, how soon, but that could improve the reach of both.”
Deltacom is one of the largest competitive telecommunications providers in its primary eight-state region, including Louisiana, Mississippi, Tennessee, North Carolina, South Carolina, Alabama, Georgia and Florida. It also operates a SONET network in a 14-state region, including its core territory plus Arkansas, Texas, Virginia, Maryland, New Jersey and New York.
New Edge Networks operates a nationwide SONET network, with carrier-class multiservice switches to deliver private MPLS and Internet services to businesses via Ethernet, OCn, DS3, DS1, DSL and wireless broadband. Built around 21 regional aggregation points (RAPs) located in major metropolitan areas, its network extends into several hundred markets, including rural and semi-rural towns and cities.
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