Fierce did a list of the 10 worst telecom business moves of the past 10 years. Here is my list of telecom disasters in the last 10 years.
(1) InterNAP cutting the channel in 2011.
(2) Sprint buying Nextel in 2004 was longer than 10 years but Sprint is still reeling from that. They have had poor strategy and leadership since. Why? Sprint forgot that they had other divisions besides cellular – decent pin drop fiber network, Internet backbone, MPLS and even cloud services. Did you know that they integrated Broadsoft into their cellular network before VZW One Talk? Unfortunately, Sprint just couldn’t execute.
Using WiMax first before switching over to LTE was another blunder.
T-Mobile CEO, John Legere, is a focused CEO ow with a mission. All that focus will be lost with a merger with Sprint.
(3) Telcos into Data Center: Verizon buying Terremark; Windstream buying Hosting Solutions; and Centurylink buying Savvis were all disasters for the assets acquired. The companies actually made some money on 2 of those 3 deals with the buy/sell, but the data center business lagged at each company.
The Terremark CEO (Medina) sold his company to VZ; then bought the data center biz from C-Link to form Cyxtera.
(4) CenturyLink-Level3 Merger will be an unmitigated disaster. The debt will increase; revenues will dip. It will be even harder to deal with either company for at least 2 years (if not always).
This ties into: NO merger has been good for the industry or the entity. From Sprint/Nextel to CenturyLink/Level3. Many of these mergers are the result of C-Suites just wanting to cash out. Bankers do well – and some stock holders – but customers and employees bear the brunt. Hard to sell service when it is a challenge to quote, install and service.
(4) LightSquared (rebranded as Ligado) was a huge failure, but so was DISH Network’s decision to buy spectrum. Why? DirecTV – even going through an acquisition by Ma Bell – is kicking DISH’s ass. The lack of CEO focus is apparent. DISH hasn’t done anything with the spectrum – and likely never will. It is far too expensive to build the 5th nationwide cell network.
The 5th largest cellco is US Cellular (owned by RLEC TDS). US Cellular has just 5 million subs. And DISH or Ligado think they will come along and build out a 5th network to compete and compliment AT&T, VZW, T-Mobile and Sprint. AT&T and VZW spent between 5-7 billion dollars each year on their cell network!
Spectrum is like land, but also like land, location is everything. Certain spectrum (700-3500 MHz) works well for wireless. The rest of the frequencies require a lot more engineering and specialization to avoid interference with current uses like GPS, wireless microphones and TV/radio stations.
(5) Google Fiber was not a disaster. Like Google Fi, Alphabet has no desire to become a national ISP. They like performing experiments that result in other companies doing more. Without Google Fiber, gigabit would not be a thing today. Yeah, approximately 19 million Americans—6 percent of the population—still lack access to fixed broadband service at threshold speeds, but that is the problem with the politics of the FCC. [The current Chairman is a telecom disaster though!]
(6) Frontier/Verizon, Frontier/SNET and Fairport/Verizon – buying used copper plant has not worked out well for either RLEC (Fairpoint or Frontier). Fairpoint went bankrupt and is now owned by Consolidated. Frontier is on the verge of BK. As of today, FTR has a market cap of under $1B – they spent $10.6B to buy Florida, Texas and Cali assets from Verizon just last year!
(7) Cbeyond/Birch – this acquisition (the 23rd by Birch Holdings) should have resulted in a national powerhouse. Instead it resulted in a slowly decaying company that still relies on legacy services to prop it up. Now merging into Fusion, Birch Holdings will be the majority owner of FSNN in its 25th acquisition. It may have lipstick and makeup but still…
Cbeyond had $450-500 Million in revenue when Birch bought them in 2014 for $323M. Fusion will have $575M in revenue after the merger, up from its current $150m in annual revenue. That means Birch is doing $325M. What happened to almost $175M in annual revenue? 25 companies and the revenue is just $325M?! FAIL!
(8) The Cable Merger of TWC/BHN/Charter. In less than a year since this merger happened, my BHN bill has increased twice. This merger sucks! Less competition is never good.
Plus Spectrum can’t even deliver an inter-state EPL!
(9) GTT Chasing $1B in revenue. Rick Calder is not the first CEO to get starstruck by the idea of $1 Billion in revenue.
David Ruberg was CEO of Intermedia in Tampa, the first billion dollar CLEC. Ruberg racked up $3Bn in short term debt buying up other telecom assets and then data center company, Digex. MCI bought ICI for $3B and $3.3B in assumed debt. ICI had 90K customers! No one remembers the story of ICI, so they all repeat it.
Arunas Chesonis was the CEO of PAETEC who wished for a billion dollar CLEC. It never ends well.
I like this Instagram post from CB Insights. “Fuck Unicorns!”