EarthLink, the Atlanta-headquartered ISP known for dial-up Web access, will pay $370 million for One Comm, the struggling Massachusetts CLEC that put itself up for sale in September. The bulk of that price $285 million covers One Comms debt. Both companies boards, and One Comms stockholders, have approved the deal. However, One Comms shareholders will remain liable for the costs of the companys court case against Verizon New York Inc.
EarthLink recognizes that One Comm comes with baggage namely the uncertainty over whether One Comm can meet its debt convenants and the Verizon lawsuit. But, Chairman and CEO Rolla Huff said in a prepared statement, EarthLink is confident its nationwide IP service offering, substantial free cash flow, strong balance sheet, and strong track record of customer service and operating excellence will add meaningful stability to the financial and operating performance” of One Comm.
Investors perhaps were not so convinced. By about 11 a.m. Eastern, shares of EarthLink were down 3.05 percent to $8.71.
Meantime, an EarthLink-One Comm pairing has been rumored for several weeks to be in the works. There also was talk that PAETEC wanted to buy One Comm but one analyst predicted EarthLink would win. Thats because EarthLink is transitioning from dial-up ISP to national business-services provider, thanks to the takeovers of New Edge Networks and, more recently, ITC^DeltaCom. With One Comm in tow, Brian Washburn, research director of network services at Current Analysis, told PHONE+ two weeks ago, EarthLinks new model starts to get interesting.”
Indeed, EarthLink is transitioning into a large, super-regional CLEC with the addition of One Comm, which specializes in traditional and IP voice and data. With One Comm, EarthLink will expand in the Northeast, Midwest and Mid-Atlantic; One Comm serves about 113,000 SMBs in 17 states. One Comm will join EarthLink Business, the unit comprised of the former New Edge Networks and ITC^DeltaCom.
Once the EarthLink-One Comm deal closes some time in the first half of 2011 EarthLink Business will operate a nationwide IP network with underlying fiber assets in 30 of the countrys top 50 MSAs. Its fiber network will span 27 states with 923 colocations. EarthLink further will employ almost 3,500 people once the One Comm acquisition is done.