AFC nabs Marconi's access unit

FRAMINGHAM (01/06/2004) - Advanced Fibre Communications Inc. this week said it signed a definitive agreement to acquire Marconi Corp. plc's North American Access (NAA) business unit for US$240 million in cash.

The deal expands AFC's optical access portfolio with Fiber-to-the-Curb (FTTC) and digital loop carrier equipment. AFC already sells Fiber-to-the-Premises (FTTP) equipment, such as the central-office and premises optical electronics gear known as "active" elements of FTTP.

NAA is an established provider to regional Bell operating companies and large North American incumbent local exchange carriers. BellSouth Corp., which has an ambitious FTTC project underway, accounts for more than 50 percent of NAA's $200 million annual revenue, analysts say.

AFC, meanwhile, is currently providing FTTP equipment to Verizon Communications Inc.

"AFC gains Marconi's FTTC solution, which may turn out to be a more justifiable alternative to FTTP for some carriers," states Richard Church, senior analyst at Wachovia Capital Markets. "It (also) removes a re-emerging competitor."

BellSouth has yet to select its vendor for FTTP, an initiative by three RBOCs to run fiber and fiber-optimized services directly to homes and businesses. AFC could now be the front-runner, some analysts say, even though they believe BellSouth prefers to run fiber to the curb (FTTC) vs. to the building.

"We believe BellSouth prefers FTTC to a PON-based FTTP solution and has petitioned the FCC to include FTTC in the definition of FTTP," states UBS Warburg Analyst Nikos Theodosopoulos. "We believe this acquisition may give AFC a leg up at BellSouth, whether FTTC or FTTP. However, as the FCC has yet to rule on BellSouth's petition on FTTC, this could delay both BellSouth's choice of an FTTP vendor and future FTTC rollouts."

Marconi was looking to sell NAA to reduce debt and other expenses.

The acquisition is expected to close in the first quarter of 2004.

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