Conversent, FiberNet merge

Conversent Communications, a competitive local exchange carrier (CLEC) operating in seven Northeastern states, has agreed to merge with FiberNet, which operates in West Virginia, Pennsylvania and Maryland.

Neither privately held company will disclose the details of the all-stock transaction other than that each company will be valued as a multiple of its cash flow and that Conversent will be the majority owner of the combined company.

FiberNet’s brand will remain in the areas it currently serves, and its top executives will retain their roles in the merged company, according to Conversent CEO Rob Shanahan. The overall headcount of each company should not decrease after the merger, he said, as there are few synergies in the workforce and each company’s 2005 budget includes plans for additions in customer service personnel.

Conversent is the larger of the two CLECs, with about $147 million in revenue last year to FiberNet’s $46 million, Shanahan said. And Conversent employs 616 people to FiberNet’s 211. The combined company will have about 52,000 customers, almost all of which are businesses, and it will generate more than $70 million in cash flow in 2005.

“We become a larger player, which potentially makes it easier for us to raise more money, either public or private, and it gives us more size when we’re looking at acquisitions,” Shanahan said. “We see some renewed interest in the CLEC space, both private equity and public. If there are going to be opportunities to raise money and/or look at some acquisitions, we wanted to get this out of the way and integrated so that when opportunities arise in ’05, we’ll be ready to go.”

FiberNet gives Conversent a voice-over-IP service through its Lucent VoIP gateway. (Conversent uses voice-over-ATM and will continue to do so after the merger.) Conversent has a range of data communication products, including security products, that it plans to roll out in FiberNet territory.

The two companies’ networks don’t overlap, Shanahan said, but their markets are contiguous. “We go as far as New Jersey, and they come up to Pennsylvania,” he said. “They do have fiber in Ohio that’s not been activated, so that’s a logical expansion area for us.”

In addition to Ohio, the merged company will also expand in Pennsylvania and Manhattan. The two networks will likely connect in the carrier hotel at 60 Hudson St. in Manhattan, but the merged company will also likely lease a span of fiber from that location to Philadelphia, Shanahan said.

The two companies use separate billing systems from the same vendor, Aptis, and both use Granite database management, which Shanahan believes will ease integration.