Over on TMCnet, Peter Radizeski and Rich Tehrani are talking up a rumor, and it’s a big one for the sector. Is Verizon about to buy XO?
Actually, I’ve heard this rumor making the rounds too, with an unverifiable figure of $1.9B being bandied about as a price tag. Yet I’m more than a little hesitant to believe any of it.
Since Icahn took the company private, XO has been a bit of an enigma that outsiders have a hard time putting a valuation on. They are likely rather smaller in terms of revenue than we last saw them prior to when Icahn took the company private in 2010, as they have gone through several streamlining processes and aren’t known to have spent capex at the levels of their peers to add footprint depth etc.
But according to the rumor, Verizon’s supposed interest doesn’t derive from XO’s fiber assets or its nascent cloud efforts or its enterprise customer base, but rather from its nearly forgotten LMDS spectrum holdings. XO has long curated a large portfolio of that spectrum, obtained back during the dot com bubble. But aside from some small successes in fixed wireless connectivity, they have made little progress monetizing it over the years.
A big part of that is that LMDS spectrum (28-32Ghz) has its limitations operationally, and backhaul spectrum in these higher frequencies has always been more plentiful than demand. It’s been relatively easy and cheap to lease, and hence most with a business case to use it have taken that path. Has the combination of wireless data juggernaut, small cells, and 5G conspired to shift the balance of power in LMDS’s favor such that the big operators now envy XO’s stockpile? I suppose the shorter distances and larger potential payload make it an interesting idea, but I’ll believe it when I see it.
That being said, Carl Icahn really should have sold XO years ago. If Verizon or anybody else makes him a reasonable offer then he really ought to take it. He probably won’t, but he should.
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Categories: CLEC · ILECs, PTTs · Mergers and Acquisitions · Wireless
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If the spectrum thing is accurate, I would suppose that makes some sense. Outside of that, I cannot imagine what possible purpose such an acquisition would serve. Sell the rest off and get rid of the entire staff?
It would make more sense for Verizon to buy just the spectrum…
I would be stunned if VZ buys the company with the shareholder trial finally underway.
I have been told that Icahn doesn’t want to sell XO. He likes the NOLs. But the company has been on pause for a long time. The customer base and the spectrum would be worth $1.9B easily.
Word around the rumor mill is that Icahn has used up his NOLs.
Can somebody explain what NOL is and how it works?
Go check out the XO layoffs post here. Don’t worry. It’ll be fun.
….XO already does a tom of business with vz wireless thus they could just lease it to VZ and call it a day
I agree with you, Rob, that Icahn should have sold XO before now. In fact I get a little laugh every time I hear Donald Trump say that people should vote for him because Carl Icahn has endorsed him and Icahn is supposedly such a smartypants.
For a while in the enterprise market, XO was a nice competitive offset for those who knew to get bids from them for simple circuits and high-bandwidth Internet links on which their incumbents weren’t lowering prices fast enough. It’s always nice to have a second-tier kicker in a multi-round RFP situation like that. But now with the far more complex transformational needs that enterprises have domestically and globally, and the rise of Level 3 and (hopefully soon with their assets) Zayo into serious contention, XO’s failure to keep up in both physical buildouts and sales & technical employee expertise is threatening irrelevance beyond SME type customers.
It’s probably a stroke of luck that they have spectrum holdings like this at a time when they’re so valuable. If LMDS spectrum really fits into Verizon’s 4G/5G plans then this is possible, and if so, Icahn better not miss this opportunity. If this is just empty spin, which is also possible, then it’s just a temporary lark of a story.
Word at xo is this is a done deal…..
I know Icahn has had a rough go of it investing and he is finally in trial for his XO buyout but VZ seems like more of a asset purchaser here(wireless) than the entire company given they have let it be known they would like bidders for their enterprise division.
It’s official. Announcement came out this morning.
Doesn’t Level 3 have wireless LDMS assets purchased from someone years ago. Seems to ring a bell. Anyone?
Yes the have +70 LDMS wireless assets they obtained through the Telcove purchase.
My company was using some as access in New York City.
Verizon came on promising all of us that they would grandfather the XO team on board. That was a lie. They came in and offered us 3 different “options”. option 1 was to relocate to their chief financial office in Tulsa, OK. Option 2 was to apply with Verizon doing something else. A lot of us did and got nothing back. Option 3 was to take a severance. All of us in the Colorado office took severance. I find it funny how Verizon acts like they care about customers and their products and services offered to them yet makes little to zero effort in learning how XO’s products actually work and function. They have no idea how to do any of the financials of XO’s business and asked about a week before we were let go to help them understand and train them. lol what a joke. Verizon cares nothing for its customers both internally or externally.As for Icahn bailing out on XO. Yea he had to. Grivener shot us an email explaining how he was told to keep XO unprofitable so Icahn could buy the rest of XO’s shares for pennies on the dollar. He sent this to us just before leaving which I’m sure didn’t please Mr. Icahn at all. Anyways….the song and dance continues.