Verizon Communications has signed an agreement to purchase XO Communication’s fibre-optic network business for approximately $1.8 billion.
Verizon will take ownership of XO’s fibre-based IP and Ethernet networks, which it will use to strengthen its business with enterprise and wholesale customers. In addition, the acquired fibre facilities will help Verizon continue to increase the density of its cellular network.
Separately, Verizon will lease available XO wireless spectrum, with an option to buy that spectrum by year-end 2018.
The acquisition is subject to regulatory approval from various governmental agencies and is expected to close in the first half of 2017. XO will continue to operate independently in the interim.
Verizon expects to receive several financial benefits from the deal, including a step-up in the value of property on its books as well as operating and capital expense savings.
XO operates metro fibre networks in 40 major markets, with more than 4,000 on-net buildings and 1.2 million fibre miles. XO’s intercity network spans 20,000 fibre miles and 85 cities.
The net present value of the operational synergies is expected to be in excess of $1.5 billion, the company adds.
Carl Icahn, chairman and sole shareholder of XO Holdings, sounded more resigned than excited about the deal: “Although this sale to Verizon does not represent a significant annualised return on our investment, we believe that in today’s environment it does represent the best achievable outcome for the company’s customers, employees and owner,” he said.
Icahn began purchasing the senior debt of XO in 2001, and the following year the company filed for bankruptcy. He worked diligently with other stakeholders to keep XO alive, and in 2003 the company emerged from bankruptcy, but it has required several additional capital injections to keep it afloat.