Williams reawakens: Flurry of deals puts `former' carrier back in the spotlight

Williams Communications is wasting no time re-establishing itself after a three-year hiatus from telecom, signing with at least 28 new carrier customers in the last year and pumping about $1.5 billion into its revenue base.

Williams has virtually reinvented itself with deals such as last week's contract with Nortel Networks to provide optical solutions for the first phase of its U.S. metro expansion; its acquisition of SBC Communications' long-distance network assets; and an agreement to provide network services and dark fiber to Cogent Communications, an Internet service provider.

"Williams is the best friend to an industry that has a lot of emerging companies that need network capacity," said Gordon Martin, Williams' president of carrier services.

In 1995, Williams - then called WilTel - had focused its network business on providing wholesale and bandwidth to standard data, voice and video services to other carriers. It sold most of its network unit to LDDS Communications that year. The agreement included a three-year, non-compete agreement, so Williams concentrated on its equipment-supply business.

Since emerging from this agreement, Williams has reasserted itself as a "carrier's carrier."

In March, SBC sold Williams a 2200-route-mile fiber optic network. Formerly owned by Ameritech, the network assets are located in Illinois, Indiana, Michigan, Ohio and Wisconsin.

In April, Williams leased more than 12,400 network miles to Cogent for a reported $215 million.

Also in April, Williams signed a $115 million deal allowing CTC to use 8300 route miles of dark fiber. The lease expanded CTC's network presence in Washington, Boston and into 40 major U.S. markets.

In January, Williams completed a 20-year, $220 million transaction to provide Axient Communications with nationwide Internet content and invested $10 million in Axient through the purchase of Series B preferred stock.

"The game Williams is playing is sort of like musical chairs," said Rob Norcross, vice president of Mercer Management Consulting. "The stock market appears to be valuing these types of companies as if they'll be bought out or merged with a larger carrier.

"If Williams doesn't play, they could be left out there alone because the whole world is moving toward a more integrated service network, and eventually, Williams will, too."

Recently, Williams decided to venture into a new market: U.S. metropolitan networking. The first phase of this expansion includes the selection of Nortel equipment.

Williams also has enjoyed international successes.

"It is very much a focus on our part to build on- and off-ramps to our networks," Martin said. "You'll see continued growth for expansion globally, at a low cost, but you will also see relationships with first-, second- and third-tier carriers on a global basis."

Some believe Williams is positioning itself to be sold or to merge with a larger carrier, but Martin disagrees. "We're executing on a unique business model that affords us the opportunity to outsource the underlying network capacity in such a way that companies can drive the benefit they need from that relationship."

In addition, "Williams Communications shareholders are not prepared to release this asset at this point in time because we see great opportunity for shareholder value long term," he said.