Qwest is buying OnFiber Communications, a privately-held provider of metropolitan Ethernet and wide-area networks. Qwest said it will pay $107 million, with an option to substitute up to $35 million of Qwest shares for cash. The transaction is anticipated to close in the third quarter.
OnFiber, based in Austin, Texas, specializes in high-bandwidth, all-fiber solutions serving primarily large business and government clients. The company operates an all-optical network in 23 metropolitan areas and features a full offering of access and transport services, including Ethernet and Sonet.
Qwest provides similar solutions to metropolitan areas within its 14-state operating region; the acquisition widens Qwest's out-of-region metropolitan coverage while meaningfully reducing third-party access costs.
OnFiber expects to post a profit of about $15 million on revenue of nearly $60 million in 2006, representing year-over-year growth of more than 20 percent. Qwest said it anticipates "run-rate synergies" of about $25 million annually, due primarily to the elimination of overlapping facilities and the reduction of network access costs.