Merger expands Excel endeavors, Fiber optic network key element in buyout of Telco

After growing its Amway-style long-distance resale into a billion-dollar business, Dallas-based Excel Communications Inc. has moved into the realm of facilities-based carriers.

On June 6, Excel announced that it is buying Telco Communications Group Inc. of Chantilly, Va. Telco, which sells long-distance through 10XXX dial-around, also owns a network with 100,000 miles of DS-3 fiber optic capacity and six DEX switches.

"That's the reason for the acquisition - to get ahold of their network," said Excel Chairman and Chief Executive Officer Kenny Troutt. "With their network, their minutes and our minutes, we could make this network very efficient.

The acquisition also expands Excel's customer base. Telco executives will continue to operate their business units under the Telco name, but Excel plans to capitalize on Telco's professional sales force, Troutt said.

Business accounts have not typically been Excel's domain, said Eric Strumingher, first vice president with Paine Webber Inc. in New York. "Selling service to businesses requires a much more sophisticated sales approach," Strumingher said. "Excel's representatives typically don't get that kind of training. What they do have is great breadth in terms of relationships.

Those relationships translate into leads that Telco's sales force may be able to turn into profits, he said.

The acquisition also means that as Excel's agreements to resell long-distance minutes expire, the minutes its reps sell will be on Excel's own network. That will mean significant cost savings for Excel, Troutt said, but the change will be "transparent" to its customers. No layoffs are expected, he said.

Another benefit from the merger is that projected 1997 sales of more than $2 billion would make the merged company one of the five largest long-distance companies in the U.S. The company is poised to grow even more, said Michele Wolf, vice president at Bear, Stearns & Co. Inc. in New York.

"[Excel] got access to enough capital [through the merger] to take some very aggressive steps toward solidifying their position," Wolf said.