XO Communications Inc. revealed plans last week to launch a data-centric broadband network in Western Europe as early as mid-2001.
Western Europe’s early adoption of mobile technology, combined with its tight geographical layout, make it one of the fastest-growing data services markets in the world. XO estimated its value between $165 billion and $185 billion.
During the recent broadband fixed wireless auction held in the United Kingdom, XO won three licenses in London, Manchester and Birmingham for a total of $15.2 million. The licenses cover more than 17 million pops.
“We now have in place a European plan that optimizes capital spending and operationally positions XO to seize a tremendous business opportunity in Europe,” said Dan Akerson, XO chairman and chief executive officer.
XO said it intends to provide high bandwidth data services including global transit, transport, gigabit ethernet, virtual private network and shared and managed hosting services.
The company recently hired industry veteran Mike Read as president of XO Europe to help develop the strategy. During a conference call highlighting the deployment, Read said one of the company’s first goals is to transition its existing Concentric business into higher-margin customers. The second phase will seek to gain traction on its data product set and look at employing soft-switch technology to offer voice service.
“The key … is that we need to get customers that are on our network. We need to go minimum pop to pop on our network, and we need to get customer prem to customer prem,” Read said.
Under terms of recent agreements reached with Level 3 Communications Inc., XO plans to deploy metro fiber facilities that include a number of empty fiber-optic conduits in London, Frankfurt, Amsterdam and Brussels, and dark fibers in Paris. XO also will receive 24 fibers to connect the company’s metro European networks in five countries with more than a terabit of capacity utilizing current optical technology. In addition, XO said it will receive transAtlantic capacity to connect its customers in Europe to North America.
The agreements reduced XO’s payments to Level 3 from $306 million to $163 million in exchange for a reduction of network facilities. XO also received the rights to empty fiber conduits for future network deployments in Berlin, Dusseldorf, Hamburg and Munich, Germany.
Read noted that XO Europe does not believe in a “build it and they will come” strategy.
“I’d much rather build small where customers require us, and for that reason we are focused in the tier-one markets, but I’m comfortable now in tier-two markets as well,” said Read.
The news caused stock prices of the company to plummet around 17 percent to $14.53. The stock has fallen 66 percent this year overall. At RCR Wireless News press time, XO was trading at $15.
Despite the wary outlook on Wall Street, XO said the methodical structure of its plans, as well as its financial stability going forward, should put investor’s minds at ease.
“We remain funded well into late Q4 of 2001, and possibly well into 2002 if we get some likely network swaps, dark fiber sales… ,” said Nate Davis, president and chief operating officer of XO.
Davis expects losses next year to total approximately $50 million, and he expects the company to break even in 24 to 30 months.
“This industry is not for the faint of heart. It’s not for the inexperienced, and I think what we’ve crafted together here is a measured, deliberate, paid program that I think will benefit our shareholders in the coming years,” said Akerson.
