360networks buys U.S. firm

Less than two years after filing for bankruptcy, infrastructure builder 360networks Corp. announced last month the acquisition of Houston-based Dynegy Inc.’s communications business. The move marks the second major purchase by the company in less than two months; in February, 360networks acquired the operations of competitive local exchange carrier Group Telecom Inc of Toronto.

Chris Mueller, a spokesperson for Vancouver-based 360, said that positive and creative steps are being taken to rebuild the company’s business plan.

“You can grow your business organically, meaning you can just have your sales force out there picking and shovelling and trying to get new business, or you can take advantage of this opportune time we have right now,” Mueller said.

These opportunities have come about because of the numerous firms that got themselves into the telecom business that now, according to Mueller, want to get out. He said Dynegy, an energy company, has spent close to $1 billion on U.S.-based assets, but are now trying to cut their telecom ties, which makes for desirable bargain-shopping for 360networks.

“[The purchase] is giving us route diversity, metro access, it’s giving us inventory, it’s giving us nearly 50 carrier customers. All of which are beneficial to our own business plan that, because of the timing, we we’re able to acquire those very cheaply,” Mueller said.

David Byford, director of corporate communications for Dynegy, said that the company has exited from communications due to poor results and to reconstruct the company around Dynegy’s core energy businesses.

“We entered the business because it was our belief that a strong North American market for bandwidth would occur. This never fully met our expectations,” Byford said.

Brownlee Thomas, an analyst with Giga Information Group Inc. in Montreal, said Dynegy made a wise move to exit from communications because energy companies have no business with telecom.

“In the early days, I would say ‘Well, what do you know about telecom?’ And they would say, ‘Well, it looks and it smells and it feels like a commodity to us, so we think we should be trading in it.’ And I would say to them, ‘It is not a commodity, and even if it looks and smells (like one), it isn’t going to act like an energy commodity.'”

Mueller said the acquisition would mean greater diversity for 360’s Canadian customers.

“The Dynegy network…has a different route footprint than ours. So, we’ve bought ourselves some diversity, and we also bought ourselves metro access into 10 large U.S. cities, all of which would probably be attractive to not only our U.S. carriers, but also our Canadian carriers, which we’re getting increased cross-border traffic,” Mueller said.

He said 360networks’ acquisition of Dynegy should appear seamless to customers.

Elroy Jopling, an analyst with Gartner Inc. in Toronto, said this acquisition puts 360networks on the fast track to recovery, but with every fast track, there are speed bumps along the way.

“Are they in over their head from a financial perspective? There’s a natural operation of taking and melding, rationalising what they have through Dynegy with what they already have in the U.S.…Anytime you put two businesses together, it’s never an easy operation,” Jopling said.

“However, if they have the financial wherewithal to be able to pull this off and do it over the next year or two, then they probably have done very well.”