Access, Birch Wrapping Up Merger

The merger of Access Integrated Networks Inc. and Birch Telecom is slated to close any day now, but this deal doesnt seem to have the impact of other combinations, such as that of PAETEC and McLeodUSA Inc. Rather, the coming together of Access and Birch will firm up regional coverage and provide new opportunities for channel partners selling those companies services. Other than that, the transaction doesnt have those far-reaching ramifications as did the other acquisitions and mergers that happened throughout 2007, says Craig Clausen, senior vice president and COO for New Paradigm Resources Group (NPRG). But that doesnt mean its ho-hum, something people dont need to pay attention to.

On Nov. 2, Access said it would buy twicebankrupt Birch for an undisclosed amount. The companies are privately held. They did say, however, that their combined annual revenue will total $200 million. They also said they will have more than 300,000 voice and data lines, 100,000 SMB customers and 400 employees. Access is based in Macon, Ga., and Birch is headquartered in Kansas City, Mo. Vincent Oddo, president and CEO of Access, is retaining that role.

Stephen Dubé, who has served as head of Birch since April 2006, is returning to CXO LLC, the Dallasbased management consulting firm that has advised Birchs senior lenders.

Birch first filed for Chapter 11 reorganization in 2002. It filed again three years later after the FCC did away with UNE regulations. Birch had built its business model on the ability to access LEC networks but since, like Access, has worked to become facilities-based.

This marks the second time Access, founded in 1996, has bought distressed assets, says NPRGs Clausen. In late 2006, Access purchased 24,000 local access lines from Trinsic Communications Inc., which went bankrupt and was bought by private equity firm Platinum Equity in early 2007. Access probably paid a reasonable sum for Birch and its customer base, says Clausen, but beyond that, he wonders what Access plans for the long-term. Buying Birch doesnt move their business plan forward in a meaningful way, he says. They didnt acquire a bunch of softswitches.

Access has installed some equipment as it moves to a facilities-based model, but it largely still relies on commercial agreements with AT&T Inc. to reach its customers. We eventually will not be a reseller, says Oddo. Thats thanks in part to Birch, which built a good bit of its network in Kansas, Missouri and Texas, Oddo says. Access plans to keep adding capacity so it will be able to operate independently of incumbents. Access reaches nine southeastern states.

Channel partners should find the merger beneficial. Oddo says Access will roll out new programs in Birchs territory over the next year and expand its programs in Access regions. Clausen says thats a good move. Access runs a strong channel and compensates its agents well, he says. Given what Access Integrated has done in the past with respect to sales and channel partners, I think theyll grow that more, he says.

Oddo was able to speculate a little about what he hopes to see happen with the channel program. Birch, he says, has been in harvest mode only, not growing their business, for the last couple of years. This means few channel partners remained with the company. Oddos not sure how heavily Access will pursue former Birch agents since we dont know who they are or what kind of relations they had, but we would certainly like to talk to them, he says. Meanwhile, current channel partners are excited about the Birch addition, he says. A number of them have business in the southern Midwest that they couldnt give to Access before the Birch acquisition, he says. Theyre excited about being able to expand the overall relationship.