In the Spotlight: Zayo CEO Dan Caruso

After buying five companies in succession, including four regional fiber networks and a retail VoIP provider, Zayo Bandwidth has reorganized itself into an umbrella operating company, Zayo Group, and three independent units: Zayo Bandwidth, which will operate the fiber networks for customers including carriers, governments, and large enterprises; Onvoy Voice Services, which provides tandem switched access, long distance, SS7, directory assistance and operator services to local exchange carriers (LECs) and other communications providers; and Zayo Managed Services, which offers voice, data and video offerings to small to mid-sized enterprise customers. Telephony Editor-in-Chief Carol Wilson spoke to Zayo Chief Executive Officer Dan Caruso about his company’s meteoric rise.

On the pace of the acquisitions: This is happening quicker than we would have thought. We had not expected to sign and close five acquisitions in one calendar year. We got lucky. Most of the properties that have been sold this year – we have been buyers of. Other more natural buyers were distracted by other things – often, acquisitions they had made themselves, like Level 3, Time Warner Telecom and perhaps Qwest. Over time, they have been the strategic buyers of these type of properties.

On how the integration process is going: The first three companies--PPL Telecom, Indiana Fiber Works and Memphis Networx--are largely integrated together. The step with Onvoy is two-step process: First we have to de-integrate it, or separate it into two entities, taking the bandwidth portion and combining it with Zayo Bandwidth. Then we combine Voice Pipe with Zayo Managed Services. We expect to get through step one by the end of the year and step two in the January-February time frame.

On creating three separate companies: I’m a huge believer in focus and staying true to what your core competency is. I truly believe in rigorous P&L management. I don’t like a ton of different activities commingled into the same operations, with the same engineering and the same financial management. It makes it hard to do a good job for the customers and to do a good job for the investors. I want Zayo Bandwidth to stay laser-focused on what it does best, which is providing high-bandwidth services to carriers and companies. The Onvoy voice portion is very unique; it’s a statewide tandem service. They use and leverage the fiber network of Zayo Bandwidth, but the customer base and how the business works financially is so different. Zayo Managed Services is targeting enterprise customers, smaller to medium-sized, with a very complex set of services. It looks completely different, more akin to a Cbeyond, or Paetec.

On future acquisitions: Our primary focus is going to stay on fiber-based properties. The other two units’ focus will be to separate themselves out and demonstrate they are running a good business. If there is an opportunity to grow inorganically, or by acquisition, in those businesses after that, we’ll look at it.

On the pace of future acquisitions: If there are deals out there available to us, in the price and terms acceptable to us, we hope to be able to get them done. If deals aren’t there or prices are bid up, we won’t be acquiring.

On the current environment: There is a lot going on right now. Debt markets are very tight. Some people think we are looking at a recession. Some people are having their own struggles right now. How that translates into prices for bandwidth is anybody’s guess. What we do know is that demand for bandwidth will continue to grow. It’s in our best interest to help our customers be able to support higher bandwidth services.