Tight capital markets may have slowed telecom consolidation in 2008, but Zayo Bandwidth is not deterred. The company went public last summer with its strategy of acquiring fiber assets in Tier 2 and Tier 3 cities and has lived up to that plan, with a total of six acquisitions. In February, Zayo closed its acquisition of CityNet and yesterday announced $30 million in debt refinancing to cover that deal.

“This continues us on the path of having a mix of debt and equity funding,” said Zayo CEO Dan Caruso. “It is going to be harder for most companies to be active in consolidation during a period of time when funding is hard to come by. We are going to continue to be active ourselves. We have five very large private equity funders behind us. They are supportive, and things are going well. If the right opportunities present themselves, we will still be acquiring.”

The five investors are Battery Ventures, Columbia Capital, Centennial Ventures, M/C Venture PartnersandOak Investment Partners.

Zayo Group has raised $225 million in equity financing and secured $115 million in debt facilities. The most recent debt refinancing was led by CIT and is co-sponsored by CoBank and Hercules Technology Growth Capital.

All of which has Caruso, a CLEC veteran, smiling again.

“It’s fun to be part of the industry again,” Caruso said.

A big part of that is the demand for services – Zayo is a carrier’s carrier selling bandwidth on its fiber-optic networks.

“Bandwidth is booming,” Caruso said. “It has been growing every year for as long as any of us can remember, but in 2007, the growth was mind-boggling. A lot of it is driven by all the video. Compared to one year ago, the change has been staggering.”

Zayo also has managed to avoid the integration issues facing some service providers that have gone on acquisition binges, according to Caruso, in part because the properties it is acquiring are contiguous and can continue to offer wholesale services during what he admits is “the tedious process of figuring out best practices.


“We can do that over time,” he said. “We’re selling bandwidth to large carriers, so it’s not a very complicated integration process. With CityNet, it was a well-run company, and they got a nice price from us. We are going to leverage their know-how and the skills of their people. The overwhelming majority of those people are hoping to be with us for the long run.”

The other big area of focus for Zayo now is wireless backhaul, where the company is taking on major projects for major operators, signing seven- to 10-year deals to extend its fiber facilities to cell sites.