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Summary:

Level 3, has been steadily acquiring companies in an effort of trying to get a better grip on the banadwidth market place, which is resurging because of growing demand from new digital application providers. Now Qwest has jumped into the fray, and has just acquired OnFiber […]

Level 3, has been steadily acquiring companies in an effort of trying to get a better grip on the banadwidth market place, which is resurging because of growing demand from new digital application providers. Now Qwest has jumped into the fray, and has just acquired OnFiber Communications, a San Antonio, TX based provider of metro ethernet services for $107 million in stock. Update: The company had raised nearly $146 million in funding over the course of its five year life…..

This is a company that was started by Infinera co-founder Jagdeep Singh, and was one of the telecom investments by Kleiner Perkins Caufield & Byers. I have written about the start-up, which survived the downturn, and now operates all-optical network in 23 metropolitan areas.

As an aside, Danny Bottoms, the CEO of OnFiber had worked with Qwest back in the day when company was getting started. And now he has come the full circle. (This story is chronicled in Broadbandits: Inside the $750 Billion Telecom Heist)

Back to the deal, OnFiber will have sales of $60 million in revenues and roughly $15M in EBITDA in 2006. UBS Research says that Qwest will continue to look at opportunities to acquire out-of-region CLEC assets as a means to reduce its third party access costs. They also think that the Qwest “management is focused on acquisitions with relatively short paybacks and easily identifiable synergies.”

By Om Malik

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  1. this is an interesting aqquistion — Onfiber seems to be onthe wire provisioning services.. !!

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  2. yes. that is true. i think one should basically think that Q is going to get pretty aggressive in the business services space. secondly, if i remember, level 3 was one of the early backers of onfiber.

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  3. who’s next? TWTC/ESCH/CLEC/ABVT ????

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  4. i dont get it – if their sales and profits and outlook are all so good, why did they sell for such a low number?

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  5. Speaking as a long-term HAPPY OnFiber customer… I’m a tad worried. OF has always been fast, nimble, and excellent to work with. Their operational staff are the best in the business. I really hope Qwest doesn’t meddle with a good thing. Somehow I feel like things won’t get better for us though.

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  6. what abt BFG?

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  7. So…what happens to Qwest?

    Om, wassup?

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  8. CEO Jim Crowe explained yesterday that the “””PUSH”” to get TelCove was to strike “”DEEP””” into the ACCESS LINES of the underbelly…
    The METRO PUSH is on…Level3 will have MORE aquisitions imho
    skibare

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  9. the long haul carriers need to get at large enterprises and data centers before the FCC, et al, make it impossible to work with the two remaining phone companies.

    note that OnFiber turns out to be a bonfire of investor capital. They raised and spent more than they sold for; and only after acquiring the bonfire that was telseon.

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  10. Om – OnFiber was founded by Steve O’Hara. Jagdeep Singh and Drew Perkins came in later. Steve brought in Andy Bechtolsheim, who in turn introduced him to Vinod Khosla, who in turn introduced Jagdeep and Drew – who were both on their non-compete with Ciena (after the Lightera acquisition). Mike Guess was later name a co-founder as a condition of his joining the company.

    Just making sure history doesn’t get distorted or re-written.

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