Zayo Group Holdings is paving the fast lane of the internet with
miles of fiber optic cable. The company provides high-speed
fiber-based bandwidth and services over its network that now
exceeds 112,000 miles. Spanning more than 45 US states and
Washington, D.C., the network penetrates more than 300 geographic
markets. Zayo is expanding internationally with offerings in the
UK, France, and Japan. Wireless and wired carriers, data centers,
media and Internet companies, and government agencies use Zayo's
network to transport data, voice, video, and Internet traffic, as
well as to interconnect networks. Acquisitions are a key part of
Zayo's route-building strategy.
Change in Company Type
Zayo Group Holdings sold shares to the public for the first time
in 2014, raising about $300 million for the company. About 16
million shares were sold by the company and about 8 million were
sold by stockholders.
Zayo's business segments are Dark Fiber Solutions; Network
Connectivity; Colocation and Cloud Infrastructure; and Zayo
Network Connectivity, 40% of revenue, provides bandwidth
infrastructure over Zayo's metro, regional, and long-haul fiber
networks. Dark Fiber Solutions, a third of revenue, provides raw
bandwidth infrastructure to customers that require more control of
their internal networks. It makes direct fiber connections to cell
towers, small cells, hub sites, and mobile switching centers.
Colocation and Cloud Infrastructure, 14% of revenue, provides
infrastructure for data centers. It's services include colocation,
interconnection, cloud, hosting and managed services such as
security and remote hands offerings. Zayo Canada, the asset of the
2016 acquisition Allstream, contributes 12% of revenue.
Zayo does 78% of its business in the US with Canada and Europe
supplying 12% and 10%, respectively. In the US, it owns fiber
networks in more than 300 metro markets, including New York,
Chicago, and San Francisco as well as smaller areas such as
Allentown, Pennsylvania, Fargo, North Dakota, and Spokane,
Washington. Internationally, the company owns fiber networks in
London and Paris.
Sales and Marketing
Zayo sells mostly through its direct sales force. The company's
largest single customer accounts for about 6% of revenue, and the
10 biggest customers account for about 26% of revenue.
Zayo's revenue growth in the past five years makes the hockey
stick curve look lazy. Revenue zoomed 28% higher to $1.7 billion in
2016 (ended June), compared to 2015. Most of the gain came from
Zayo's Canadian operations (the Allstream acquisition).
The company cut its loss in half to $76 million in 2016 from
loss of $155 million in 2015 from the rise in revenue. The
company's cash flow from operations moved to $714 million in 2016
from $605 million in 2015.
Zayo is firmly in growth mode, investing in building its
high-speed fiber infrastructure in the US and increasing its
footprint overseas. It has spent almost $704 million in the past
two years to expand and maintain its high-speed fiber networks.
The company has continued to extend fiber between cities and
within metro areas, big and small. It is working on a 1,000-mile
dark fiber route between Omaha, Nebraska and Dallas, which will
connect those cities with Bentonville, Arkansas, and Tulsa,
Oklahoma. The company has also completed or acquired routes between
San Francisco and Sacramento, San Diego and Yuma, Arizona, and
Denver and Chicago.
Acquisitions are key part of Zayo's strategy. Overall, the
company has bought 38 companies for a total cost of $5 billion.
Mergers and Acquisitions
Zayo stepped up its acquisition game in 2016. In December Zayo
agreed to buy Electric Lightwave, formerly known as Integra
Telecom, for $1.4 billion in cash. Electric Lightwave provides
infrastructure and telecom services in the western US. It has 8,100
route miles of long haul fiber and 4,000 miles of metro fiber in
Portland, Seattle, Sacramento, San Francisco, San Jose, Salt Lake
City, Spokane, and Boise supplying on-net connectivity to more than
3,100 enterprise buildings and 100 data centers. The Electric
Lightwave operations are to be integrated into Zayo's
infrastructure-related operations and its Canadian operations. The
deal is expected to close in the first quarter of 2017.
The Electric Lightwave agreement followed the Allstream purchase
($423 million (Canadian). That added some 18,000 route miles to the
Zayo fiber network and gave Zayo a strong presence in Canada.
Zayo acquired Clearview International, a Texas-based colocation
and cloud infrastructure services provider, $18.3 million. The
assets were data centers in Dallas and Waco, adding 30,000 sq. ft.
of colocation space and hybrid cloud infrastructure services.
In 2015 Zayo Latisys, a colocation and infrastructure as a
service provider for about $678 million. Latisys acquisition
brought colocation and Infrastructure-as-a-service (IaaS) offerings
through eight data centers in Northern Virginia, Chicago, Denver,
Orange County, California, and London.