Verizon to Acquire XO Communications' Fiber Business for $1.8 Billion

Verizon (VZ) has added a fiber-optic network business to its portfolio. 

The telecommunications giant has announced plans to acquire the fiber-optic network business of XO Communications (XO) for approximately $1.8 billion.

In addition, Verizon will simultaneously lease available XO wireless spectrum, with an option to buy that spectrum by year-end 2018.

So what does the acquisition mean for Verizon and XO?

The acquisition of XO’s fiber-optic network business provides Verizon with access to XO’s fiber-based IP and Ethernet networks and fiber facilities to help the company “continue to densify its cell network,” according to XO.

Verizon said it expects to receive several financial benefits from the transaction, including a step-up in the basis of the assets as well as operating and capital expense savings, and the net present value of the operational synergies between Verizon and XO is expected to be in excess of $1.5 billion.

Also, the transaction may help XO strengthen its business.

“This transaction will create a stronger provider of business broadband services for the customers of XO Communications,” Chris Ancell, XO’s CEO, said in a prepared statement.

Verizon noted the transaction is subject to customary regulatory approvals and is expected to close in the first half of 2017.

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