GTT ‘about to put Interoute and Hibernia on the market’

Exclusive: GTT ‘about to put Interoute and Hibernia on the market’, sources tell Capacity

06 February 2020 | Alan Burkitt-Gray

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GTT Communications is about to start finding buyers for the former Interoute and Hibernia Express infrastructure it has acquired over the past few years, Capacity understands from well-placed sources.

One senior source told Capacity that GTT might circulate details of the properties as early as the next few weeks. Another said: “Yes, I’ve been hearing the drums on this.”

Both were speaking on condition of anonymity, as were all Capacity’s sources for this report.

Randy Slack, GTT’s VP of corporate communications, commenting on the record on behalf of Rick Calder (pictured), the CEO, said: “We are unable to provide further comment at this time regarding the exploratory process linked to the potential sale of our Infrastructure Division.”

GTT announced in November that it had appointed Credit Suisse and Goldman Sachs as financial advisers for that process. “Plus we are bound to the pre-earnings quiet period,” Slack added. GTT is expected to announce its annual results in late February – though these figures might be challenging for its shareholders.

Slack did not reply to Capacity’s question about whether assets would be bundled together or sold off piecemeal.

GTT completed purchase of Hibernia Networks in January 2017 for $590 million, and Interoute at the end of May 2018 for $2.3 billion. It’s also bought companies such as Global Capacity – $161 million in cash and shares – and Perseus for $39.5 million.

As recently as December 2019 GTT completed the €50 million acquisition of KPN International, a provider of IP network services, from Netherlands incumbent KPN.

Yet, following these acquisitions – totalling $3.2 billion or more – GTT’s share price plummeted. Its share price last night on the New York Stock Exchange was $13.11, valuing the whole company at $743 million, less than a quarter of what it has spent on acquisitions in the past three years. This fall has also led to class actions on behalf of shareholders

One well-placed industry source told Capacity last night that Guggenheim Partners of New York may have won the mandate to sell Interoute and Hibernia on behalf of GTT. Guggenheim refused to confirm this. “We are going to pass on commenting on this one, but thanks for the opportunity,” said an executive by email last night.

Other senior sources in the industry said they were aware of the plans, though one said today: “They are not selling Interoute”, but were selling some hard assets to get down GTT debt. However, another well-informed consultant in the industry said: “They’re going to load all the good stuff into Interoute [for sale].”

Others have insisted that GTT is interested in selling the infrastructure, not the customer base or service operations. It’s not clear whether small data centres that were owned by Interoute are to be included in the sale.

One of GTT’s challenges over the past two years has been that the former senior management of Interoute left at the end of May 2018, when the sale was completed, leaving the group with little experience of running a telecoms infrastructure company.

Former CEO Gareth Williams became CEO of rural fibre company Gigaclear a year ago. He did not respond to Capacity’s request for comment; nor did other former Interoute executives. “I don’t really feel comfortable talking about it,” said one. According to LinkedIn, Williams, described as “advisor, investor, executive”, is still at Gigaclear.

Who might buy the assets? “I cannot say if we are interested or not. We will just have to see what develops,” said one senior carrier executive.

Another said there was a big opportunity for over-the-top (OTT) companies such as Amazon Web Services (AWS), Facebook, Google and maybe Microsoft. “I think Colt could be a likely purchaser,” said the same person. Colt refused to comment.

“Likely candidates include companies with global aspirations,” said one, but pointed out that they were an adviser to one such and therefore bound by a non-disclosure agreement (NDA).

Middle East and Asian companies might be interested, said one, adding: “It depends on the price tag. Most people who want to be in that international business already have most of the assets they want. But if there’s a fire sale, OTTs could put in on their Amex card.”

GTT has seen at least two top-level departures. CFO Mike Sicoli left in August 2019 to become president and CFO of Internap, a data centre and cloud solutions company. Chief marketing officer Gina Nomellini left in October and is now “on a career break to travel and volunteer”, according to her LinkedIn entry