Zayo Group to split into two public companies in 2019

08 November 2018 | Jason McGee-Abe

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Zayo Group has announced it plans to separate into two publicly traded companies, Zayo Infrastructure and EnterpriseCo, which is expected to complete in late 2019.

InfraCo will focus on providing core communications infrastructure and EnterpriseCo will leverage infrastructure to provide solutions for a broad set of enterprise customers.

Zayo Infrastructure (InfraCo) will be a unique, fibre-focused communications infrastructure provider with deep, dense networks and broad geographic reach throughout North America and Western Europe. EnterpriseCo will have a strong product portfolio and customer base centered on higher bandwidth connectivity to enterprise locations, including to public cloud and SaaS providers, that will be sold both directly to enterprise customers and wholesale through a carrier-focused channel.

“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.”

Zayo Infrastructure (InfraCo)

InfraCo will be comprised of the current Fiber Solutions and zColo business segments, along with the Wavelength and IP Transit businesses of Zayo’s current transport segment. The company says InfraCo will be “the leading North American and European communications infrastructure asset, with an international fibre footprint and unparalleled metro and regional density”. This business will own and operate Zayo’s Tier One IP backbone as well as the Media Networks platform that serves its strategic video customers. InfraCo benefits from strong secular demand and caters to a base of the largest and most sophisticated users of bandwidth infrastructure. As a business focused on infrastructure, InfraCo will have a clearer and more compelling path to REIT conversion given strong industry precedents. InfraCo will continue to be led by Dan Caruso, Zayo’s chairman and CEO.

EnterpriseCo

EnterpriseCo will be comprised of the current enterprise networks and Allstream segments, along with the SONET and Ethernet businesses of Zayo’s current transport segment. EnterpriseCo will have significant scale and breadth of product portfolio, while a long-term relationship with InfraCo will provide certainty on network access and cost.

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. This division will provide high-bandwidth solutions to a large, well-diversified customer base that includes over 50,000 enterprises.

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. These two business units, which will each combine resources and staff from both Allstream and Zayo’s existing enterprise segment, will be run autonomously to ensure full focus on their respective customer base and solutions.

EnterpriseCo will be led by recently named COO Mike Strople, current president of Zayo’s Allstream Segment, and Tyler Coates, SVP of Zayo’s existing Enterprise Segment.

Commenting on the benefits of the separation, Caruso said: “This transaction positions InfraCo as the largest pure-play fibre-focused communications infrastructure provider and creates an opportunity for EnterpriseCo to fully focus on our extensive enterprise customer base, solution set and business model while maintaining a strategic relationship with InfraCo. As we operate independent businesses today, we anticipate the transition to be fairly straightforward.”