Who Will Buy One Communications PAETEC or EarthLink?

PAETEC and EarthLink Inc. both are rumored to want to buy CLEC One Communications Corp., which put itself up for sale in September.

Reuters reports, though, that EarthLink is officially in the running. Bids for the Massachusetts-based One were due yesterday and pricing could fall between $500 million and $1 billion. The news service quoted anonymous sources not authorized to speak on behalf of the companies involved.

About three months ago, One Communications put itself up for sale as it risked breaching debt covenants. Since that time, PAETEC has been considered a leading contender for the rival CLEC; the purchase would expand PAETECs reach in the northeastern United States, although PAETEC wouldnt get much in the way of fiber assets. One Communications just sold those holdings to NTELOS.

A One Communications takeover also makes sense for EarthLink. As the dial-up ISP distances itself from a dying business model, another CLEC purchase would form a solid strategy, Current Analysis research director Brian Washburn said. If EarthLink combined its New Edge Networks and DeltaCom businesses with another competitive providers resources, the resulting company starts to look like a very large, super-regional CLEC.”

One Communications formed in 2006 after three CLECs merged. But earlier this fall, the economy, debt and other problems pushed the CLEC to hire private equity firm Blackstone Group LP to explore strategic alternatives” that could include M&A.

One Communications could not comment on the reported sale plans.


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