Good buy: Positron purchase gives Reltec a needed edge

Reltec announced last week that it will acquire Positron Fiber Systems to bolster its access product line and help both companies penetrate market segments they haven't been able to tap.

Under the terms of the $200 million cash deal, Reltec will integrate Positron's Sonet access products and element management technology into Reltec's DISC*S next generation digital loop carrier platform. Reltec has formed a new Access Network Systems group that will encompass its existing Access Systems unit and the new Positron division.

"The combination of Positron's capabilities gives our current customers a single platform to buy instead of piecing together a platform from multiple vendors," said Mark Cannata, director of product marketing for Access Systems at Reltec. "That was one of the big strategic reasons we made this purchase."

The purchase is also intended to better position Reltec among competitive access providers and competitive local exchange carriers. Positron traditionally has been strong in those markets but has lacked the size and product breadth to be able to fully address them and penetrate the incumbent carrier market, said Andrew Knott, vice president of sales and marketing at Positron.

"We felt we had two problems going forward: technology and channels," Knott said. "We were too small with too little infrastructure to address them properly."

One analyst said the deal is beneficial for all parties, particularly because DLC sales to the CLEC access market are booming.

"I haven't been that bullish about Reltec as far as the DLC market or any new opportunities were concerned, but the purchase of Positron is the smartest move Reltec has made in at least 10 years," said Mark Lutkowitz, president of Trans-Formation Inc. "Reltec only had 16% of the U.S. DLC market in 1997. This also helps open the doors to the traditional carriers that Positron hasn't been selling to."

Reltec's access portfolio still lacks broadband wireless products, which the vendor would require to fully address network operators approaching the access market with multiple technologies. Reltec would not comment on possible future acquisitions that would add a wireless spoke to its strategy but said it is considering different ways to handle the wireless question.

"We are looking at potential relationships with firms that have that technology and integrating it into our configuration," said Cannata.

Competitive local exchange carrier Covad Communications will announce today the availability of its TeleSpeed digital subscriber line offering in the New York and Boston metropolitan areas, as well as a second-wave rollout of the service to 16 previously unannounced cities by the end of 1999.

"The argument could be made that this is the largest [DSL] deployment in the U.S.," said Chuck McMinn, chairman of the board and former CEO of Covad. "We're definitely ahead of any CLEC, and we may be ahead of any [incumbent]."

The service is currently available to 2.5 million people and will be available to 20 million by the end of 1999, McMinn said.

The 16 markets not previously announced are Atlanta; Austin, Dallas and Houston, Texas; Baltimore; Chicago; Denver; Detroit; Miami; Minneapolis; Philadelphia; Phoenix; Portland, Ore.; Raleigh, N.C.; and Sacramento and San Diego, Calif.

The success of the deployments Covad has already made in California is driving this national expansion, McMinn said. "It's a tremendous accomplishment, and it speaks to how quickly DSL can be rolled out," he said.

However, it's difficult to tell how momentous an event this second rollout will be because Covad has yet to announce specific dates for each city, said Claudia Bacco, senior DSL analyst for TeleChoice.

"It's the same number of states as GTE, but we can't tell yet who's going to get there first." But the New York part of the equation is particularly newsworthy, she said. "If you look at the New York market right now, you don't see any big-name players there."

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