Earthlink To Acquire DeltaCom For $516 Million

After failing in its attempt to equip municipalities with Wi-Fi networks and battling Comcast to offer wholesale standalone broadband access, Earthlink reported Friday that it is acquiring fiber optic network provider ITC DeltaCom.

The "definitive merger agreement" values the acquisition at $516 million and includes the assumption of $325 million in DeltaCom debt by Earthlink.

The company will be based in Atlanta and be operated by Earthlink's Rolla Huff, chairman and CEO, and by Joseph M. Wetzel, president and COO. DeltaCom has been headquartered in Huntsville, Ala.

DeltaCom serves 32,000 small and midsize businesses through its 16,400 mile fiber optic infrastructure in the Southeast. Included in DeltaCom's nework is a 14-state synchronous optical network backbone encompassing 35 metro fiber rings and 20 voice and data switches.

"The capabilities we acquire with this acquisition will be complemented by our existing New Edge Networks business as we combine our nationwide [multiprotocol label switching (MPLS)] network capabilities with DeltaCom's state-of-the-art infrastructure," said Huff in a statement, who noted that the deal will enable Earthlink to reduce its consumer Internet service provider (ISP) cost structure.

A few years ago, Earthlink made a major effort to build a series of municipal Wi-Fi networks across the United States. The effort, like most other attempts to create municipal Wi-Fi networks, failed and Earthlink beat a hasty retreat from the business. It returned to its ISP roots and has returned strong profits in recent quarters. It ended its second quarter with $740 million in cash and marketable securities.

Earlier this summer, Earthlink complained to the Federal Communications Commission about Comcast's pending acquisition of NBCU, urging the FCC to deny the merger or adopt "a condition requiring Comcast to offer wholesale standalone broadband access to independent Internet service providers." The acquisition of DeltaCom presumably will help Earthlink in offering its own Internet-based products.

Huff said the acquisition will create a unified company well-positioned to serve Fortune 1000 companies, one-quarter of which are located in DeltaCom's footprint.

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