Yesterday, Zayo announced that they are planning to break their company into two publicly traded companies.  One of the companies is to focus on providing core communications infrastructure and another to leverage infrastructure to provide solutions for a broad set of enterprise customers.

The infrastructure company, currently referred to as “InfraCo,” will be fiber-focused infrastructure provider with capabilities throughout North America and Western Europe.

“EnterpriseCo” will have a customer base centered on higher bandwidth connectivity to enterprise locations, including to public cloud and Service-as-a-Software (SaaS) providers, that will be sold direct to enterprise customers, as well as wholesale through a carrier focused channel. EnterpriseCo will consist of two business units, an Enterprise Division and a Carrier Division. The Enterprise Division will focus on the direct-to-enterprise business and will include solutions centered on SD-WAN, IP VPN, and Unified Communications.  The Carrier Division will focus on wholesale services to carriers which enable them serve their enterprise customers, including Carrier Ethernet tails, Wholesale Voice, and SONET.

“Today’s announcement is the logical next step in the evolution of Zayo,” said Dan Caruso, chairman and CEO of Zayo. “While Zayo’s business today is organized as five autonomous segments, the complexities of these businesses have made it more difficult to achieve our growth objectives. By completely separating the infrastructure and enterprise businesses, we will enable more focused execution within each business, leading to enhanced growth and unlocking value.”

The separation into two companies is subject to regulatory and Board approval. The transaction is expected to be completed in late 2019.  At that time, Zayo’s shareholders will own shares of both companies.

Zayo’s strategy really is novel in the telecommunications industry.  Imagine AT&T or Verizon choosing to separate into smaller companies!

Zayo’s strategy assumes the key to success in the telecom industry comes through offering more focused attention to the customer.  In contrast, AT&T and Verizon’s strategy assumes the key to success comes from size: consolidating telephone service providers, and providing greater vertical integration.  Who is right?  As a great believer in the underdog, I hope it is Zayo.  As someone who loves customer focused organizations, I hope it is Zayo.  But I would not want to bet against AT&T and Verizon’s long streak of success.

To see Zayo’s announcement, see https://www.zayo.com/ca/news/zayo-announces-plans-to-separate-into-two-public-companies-one-focused-on-communications-infrastructure-and-one-on-enterprise-services/

More on Zayo at http://www.truepulse.com/zayo-expanding-dark-fiber-again/

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