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The Honolulu Advertiser
Posted on: Tuesday, September 24, 2002

Telecom assets selling dirt cheap

By Brian Bergstein
Associated Press

NEW YORK — Want to build your own telecommunications company? There's never been a better time.

Anderson Lin is vice president of marketing at OneSuite Corp., a Los Angeles firm cobbling together an empire from the rubble of telecom companies. "There's a fire sale going on, and we grabbed it," says Lin.

Associated Press

As bankruptcies, excessive debt, failed business models and conflicting visions for the future compound the industry's malaise, healthier players and eager upstarts are picking through the post-apocalyptic landscape for assets at ridiculous bargains.

Just about anything can be had in the telecom yard sale: long-distance minutes, office furniture, undersea cables, use of whiz-bang fiber-optic networks — even entire networks and their customers.

Though it's not clear how much longer the discounts can last, the shrewdest wheelers and dealers could emerge as big winners when the industry finally recovers from a disaster that has wiped out $2 trillion in investor wealth.

"This is a very, very large, one-time event that we think is going to forever change the shape of the industry," said Mike Scheele, managing director of Telecom Asset Management, a recently launched San Francisco-based firm that connects sellers to the relatively few buyers.

In a few cases, entire businesses are being created on the leavings of failed or sickly giants.

One example is OneSuite Corp., a privately held Los Angeles company that recently began offering long-distance calls for as low as 2.5 cents a minute, with no monthly fees.

Last year, OneSuite began buying long-distance minutes on the wholesale market from large providers such as AT&T and Sprint, which try to maximize the value of their networks by selling time they don't expect will get used.

OneSuite has since expanded its service and assembled a low-cost phone network of its own — not by digging up streets but by buying excess capacity on networks already built at enormous expense by companies such as Broadwing, Qwest Communications and XO Communications, said Anderson Lin, OneSuite's vice president of marketing.

"In some ways we're subsidized, because these companies are operating at a loss, so they're selling things at a great value," Lin said. "There's a fire sale going on, and we grabbed it."

Similarly, when Virginia-based Dominion Telecom, a division of the Dominion Resources Inc. energy company, launched in 1997 with $725 million in funding, its goal was to develop a 9,000-mile fiber-optic network for businesses to send and receive information.

Now with prices crashing for fiber laid by other companies, Dominion expects to develop a 16,000-mile network — which can serve many more customers — for exactly same cost, said Gregg Kamper, who heads the telecom division.