Broadview Buys Into Big Leagues

The combination of Broadview Networks Holdings Inc. and InfoHighway Communications Corp. forms a $500 million CLEC, putting the company just behind northeast U.S. rivals such as One Communications, which last year boasted $800 million in revenue, and PAETEC Holding Corp., now a publicly traded company thanks to its merger with US LEC, reporting around $1 billion in annual revenue.

The acquisition also positions the combined company to better compete against cable and telco incumbents for business customers in the region, executives say. The deal gives Broadview density in the metro New York market, InfoHighways primary focus.

The companies in late February announced the deal after about six months of talks, says Raul Martynek, president and CEO of InfoHighway. Martyneks role in the new company had not been determined by press time. Michael Robinson, CEO of Broadview, will retain his role with the combined firm. The carriers didnt disclose financial terms of the deal; both are privately held. The merger was expected to close in the second quarter. Buying InfoHighway extends Broadviews overall coverage to 20 markets from Maine to Virginia, including major metro areas such as Philadelphia, Boston and the Baltimore-Washington corridor. The new carrier whose name had not been announced by press time will serve approximately 80,000 SMBs with extended capabilities including an IP platform that supports MPLS, metro Ethernet throughout major hubs and more than 2,300 route miles of fiber.

The deal is most important for Broadview, says David Hold, senior analyst of network services for Current Analysis. Given the rate of CLEC consolidation, he says, Broadview needed to join forces with other regional carriers just to keep pace. Broadview has just recently completed the ATX acquisition, and the fact that it is pursuing another deal so soon shows just how much pressure is on CLECs to either grow or be eclipsed by larger competitors, he says.

Indeed, both Broadview and InfoHighway have gone through a series of mergers and acquisitions over the past few years. In 2006, Broadview bought ATX Communications, which had customers in Pennsylvania, New Jersey, Delaware, Maryland, Virginia and the District of Columbia. In January 2005, Broadview purchased CLEC BridgeCom Holdings Inc. Finally, in early 2002, Broadview bid for and won the assets of bankrupt Network Plus Corp. That deal gave Broadview thousands of local lines and long-distance accounts as well as a long-haul fiber network. In August 2005, InfoHighway and Eureka Networks merged. Then, in April 2006, they bought Future Telecom, a voice and data reseller in New York. InfoHighway is a former UNE-P CLEC; Eureka was a facilities-based carrier.

InfoHighway never considered merging with anyone else but Broadview, says Martynek. In addition to targeting the same types of subscribers as InfoHighway, Broadview gives the carrier the greater CO footprint it needs. After merging with Eureka Networks, InfoHighway did too good of a job transitioning from UNE-P, Martynek says. We quickly realized that to migrate more lines we needed a greater CO footprint, he explains. The costs of building a central office were too high InfoHighway liked the idea of using Broadviews existing network and reducing dependency on the Bells. We used to compete head-to-head, Martynek says of Broadview. Now we can join forces and get even more customers.

Robinson says the company anticipates offering new products such as hosted PBX, managed firewall, WAN/LANs, data storage and mini-IT help desk services. Such services will be sold through agents, for whom business will continue as usual, says Robinson. Its not in our interest to disincent agents, he says.

Martynek agrees and says the merger is overwhelmingly positive for the indirect channel. He adds he talked with top partners before the merger was announced and said they were all very excited about it. He notes that with change comes trepidation and executives for Broadview/InfoHighway will keep communicating with agents. Were going to show them how this deal will allow them and us to make more money together, he says.