Internet provider Earthlink announced today that it has agreed to buy regional telecommunications carrier ITC Deltacom.
To complete the merger, Earthlink will pay $516 million in cash, but that includes $325 million in Deltacom debt.
As a competitive local exchange carrier (CLEC), Deltacom provides voice and data telecommunications services to the Southeast. The company owns most of its 16,400-mile fiber-optic network and serves around 32,000 small and medium-sized businesses, government agencies, and enterprise customers.
Through the acquisition, Earthlink said it's looking to combine its ISP and IP businesses with Deltacom's communications operations to offer customers a suite of Internet and telecommunications services. Earthlink added that it will unite its MPLS (multiprotocol label switching) network, which directs data from one network segment to another, with Deltacom's more "state-of-the-art" infrastructure.
The combined company will also enable Earthlink to serve Fortune 1000 companies around the country, about a quarter of which are located in Deltacom's coverage area.
"As the demand for high-quality IP infrastructure continues to rapidly grow, we see a significant opportunity to focus these combined IP networking and managed service capabilities with our strong balance sheet to meet this increasing demand from enterprise level customers, wireless carriers, and multi-location national accounts while creating long-term value for our shareholders," Earthlink Chief Executive Rolla Huff said in a statement.
After the acquisition is complete, the number of Earthlink employees will reach 2,000 from around just 575 today. The company will keeps its headquarters in Atlanta, and continue to be run by Huff, Chief Operating Officer Joseph Wetzel, and Chief Financial Officer Bradley Ferguson.
Though Earthlink was once a leading Internet provider, its sales and earnings have dwindled as of late along with its subscribers. The company has also been on a quest the past several years to cut expenses and expects to save around $20 million annually by the end of the second year after the Deltacom deal is done.