Louisville Telecommunications Firm Has Made Four Acquisitions in 11 Months

By Alicia Wallace, Daily Camera, Boulder, Colo.

Oct. 5–With an average of 20 years experience in the telecommunications industry, the founders of Louisville’s Zayo Bandwidth have experienced the highs and lows.

They’ve experienced the big boom and the big bust.

“We saw the bottom start to hit, but the whole time, bandwidth demand was growing,” said co-founder Dan Caruso, whose resume includes executive roles with companies such as ICG Communications, Broomfield’s Level 3 Communications Inc. and WorldCom.

Combine that with companies’ need to work off overcapacity, and the time was right to get back into fiber.

Caruso teamed up with John Scarano, a fellow executive with ICG, Level 3 and WorldCom, to start a company whose goal was to acquire fiber-based telecom firms and focus them on providing bandwidth to carriers, Internet companies, public institutions and others who have growing needs for bandwidth.

Last year, the seasoned executives got a quarter-billion dollar backing from five institutional investors and started Communications Infrastructure Investments LLC in the fourth quarter of 2006.

In August, the company formally launched as Zayo Bandwidth, a wholly owned subsidiary of Communications Infrastructure Investments.

But the formal launch came months after the company made some big moves with the announcements of four acquisitions, the third of which it closed on Wednesday. The first news came in March, when Zayo announced the acquisition of PPL Telecom, a subsidiary of the Allentown, Pa.-based PPL Corp., which was shopping its telecom arm because it didn’t fit with the core.

PPL Telecom “is a business that we absolutely think can be very successful,” the energy company’s spokesman told the Camera at the time.

Caruso, Scarano and crew thought so, too.

They bought the telecom arm for $60 million and followed up that buy with another announcement — this time an $11.5 million deal for Memphis Networx, an arm of the city’s public utility — just a month later.

August’s formal launch of Zayo came with the word of two more acquisitions — Indiana Fiber Works and Minneapolis-based Onvoy Inc. — for undisclosed sums.

Just 11 months old, Zayo has that $125 million revenue run rate, 8,400 route miles of fiber and about 300 employees after the fourth acquisition of Onvoy closes.

“I think this helps solidify the Front Range’s position as a major employer of telecommunication professionals,” Caruso said. “Qwest, Time Warner, Level 3 … certainly we’re not as big as any of them, but now you have a fourth player headquartered in the Front Range.”

Cindy Whelan, senior analyst wholesale telecom services for research firm Current Analysis, said Zayo has an interesting premise and good potential in a “challenging” wholesale market, noting that Zayo is not competing with the big players — AT&T, Verizon and Denver-based Qwest Communications — but should be successful because of its management team, investors, the fact it’s consolidating smaller carriers and providing services in smaller markets.

“I think that the networks (Zayo’s acquisitions) put in place seem to be solid networks,” Whelan said.

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