Deal with Ionex affirms value of UNE-P, says Birch Telecom

Birch Telecom announced yesterday it would merge with integrated communications provider Ionex Telecom, a deal that Birch said would not have come to fruition if it had not had access to the unbundled network element platform (UNE-P).

The combined company will provide local, long-distance and broadband data services via more than 500,000 access lines in Texas, Oklahoma, Missouri and Kansas. It is expected to generate $350 million in annual revenues, operate under the Birch Telecom name and primarily target small and medium-sized businesses. The merger, which is subject to regulatory approval, is expected to close within 90 days.

An investment group led by the major backers of Ionex--Gilbert Equity Partners, AEA Investors, Veronis Suhler Stevenson LLC and Texas Growth Fund--will provide more than $40 million in equity funding to finance the merger. Birch eventually will migrate its customers onto Ionex’s facilities-based network, according to John Ivanuska, vice president of carrier relations for Birch, though the integration of the two companies could take several months.

Ivanuska said Birch’s sizeable customer base, built via UNE-P, was the asset Ionex’s investors found most attractive. “Without it, they wouldn’t have been interested in a deal,” he said.

He added that such a merger was exactly what the FCC had in mind when it created UNE-P shortly after enactment of the 1996 Telecom Act and said the commission would be making a mistake should it effectively eliminate the platform as a result of its pending triennial UNE review.

“The ‘build it and they will come’ approach has proved to be a false model for CLECs,” Ivanuska said. “We said, let us build a customer base through UNE-P and then we’ll migrate those customers to our switches. We’re making good on our promise through this merger with Ionex. That’s what we’ll tell the FCC.”