Update: Tellabs acquires AFC for $1.9 billion

When he was appointed earlier this year to take the reigns of Tellabs, Krish Prabhu made a point of noting that the company’s reputation as conservative and staid was not a negative in the telecom industry. Conservative and staid went out the window this morning, though, when Tellabs announced it would acquire AFC for $1.9 billion in cash and stock.

Under the terms of the deal, AFC stockholders will receive 1.55 shares of Tellabs stock and $7 in cash for each AFC share. Tellabs’ shareholders will own 75% of the merge company while AFC shareholder will have the remaining 25%.

For AFC, the deal was all about timing and merging with a company that has the strength to market on a global basis.

“There’s a lot of interest in FTTP on a global basis,” John Schofield, chairman and CEO of AFC told Telephony today. “I’d hate just because I didn’t have the resources to cede that opportunity to a competitor. I’m a big believe that if you’re the first guy in the marketplace you should be the dominant player.”

Tellabs buys into the access market, which is expected to see an increase in capital investment over the next several years. Additionally, the Naperville, Ill.-based company gets a value seat at the table with Verizon as the primary vendor in its initial fiber-to-the-premises rollout.

More important, according to Prabhu, is that the deal will pare down the number of suppliers carriers must deal with, something they have been wanting for a long time.

“We both validated this concept with our customers in as discrete a fashion as we can,” he said during a call with investors this morning. “My sense is that customers in general will welcome this. They want to work with a smaller number of suppliers.