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ISPCON Panel: Merger Mania Expected to Decline

The frenetic pace of buyouts and mergers within the Internet and network technologies will slow in the coming year, according to a panel of Internet executives speaking at ISPCON Fall '98.

While some of the big players who have merged or purchased other entities look to integrate networks, operations and corporate cultures, the lively pace of acquisitions will subside through the end of 1998, and into the beginning of 1999.

"It's a matter of who has scratched the itch, and who hasn't," said Roger Pilc, vice president of Business Development at WinStar Communications, which purchased data services integrator LANSystems, long distance and Frame Relay provider MIDCOM Communications, and national backbone GoodNet within the last year.

Noting that the Regional Bell Operating Companies (RBOCs) and foreign companies have made relatively few acquisition moves in the industry due to regulatory restrictions, Ronald Vidal, senior vice president of New Ventures at Level 3 Communications, said that the mergers and purchases will continue, albeit at a slower pace. He believes that someday in the future those restrictions will fall, and the one "who is not going to have a chair when the music stops," will be the loser.

Level 3 recently purchased miknet Internet Based Services, a German Internet service provider based in Frankfurt. John Russo, president and CEO of GeoNet Communications, a regional Internet service provider headquartered in Redwood City, California, also announced that his company's merger with Level 3 Communications was completed Wednesday morning.

Larry Sledge, the senior director of corporate planning & development at Intermedia Communications, said he believes future acquisitions will involve companies whose technology will enhance current services.

Innovation and the emergence of new technologies will determine when companies like Intermedia will return to the acquisitions market. Intermedia acquired National Telecommunications of Florida, a switch-based competitive local exchange carrier (CLEC) and interexchange carrier in April 1998; LDS Communications Group, a regional interexchange carrier headquartered in Monroe, Louisiana in March 1998, and DIGEX, national Internet carrier focused on business customers in July 1997.

The panel also agreed that future mergers and acquisitions will probably be larger and more strategic than the rush of buyouts and mergers that hit the industry in the last three months.



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