Competitive fiber network operator Cogent Communications said that it has reached a definitive agreement to buy T-Mobile’s wireline business. The price was not disclosed.
T-Mobile’s wireline business is comprised of the long-haul fiber network assets that the company acquired when it merged with Sprint. Before Sprint branched into the mobile market, it was one of the first companies to offer long-distance service in competition with AT&T, prior to AT&T’s breakup. Over the years Sprint expanded and upgraded its fiber network and branched into other wholesale and enterprise services.
Cogent was formed in 1999 as a competitive fiber network operator and has since become one of the top providers of internet backbone connectivity and other wholesale and IP-centric services. The company regularly appears on various Leaderboard “challenger” lists prepared by Vertical Systems Group that measure market share for carrier Ethernet, fiber-lit buildings and other services.
According to a press release, the T-Mobile wireline business will “complement and eventually replace Cogent’s current leased network.” In addition, the network will enable Cogent to “expand its product set, including the sales of optical wave transport services to new and existing customers.”
Cogent also sees value in the current customer base that the T-Mobile wireline network serves and in the employees who support that network. According to the release, those customers “are a fit for Cogent’s products and services” and the employees have the “knowledge and capabilities” to execute Cogent’s strategy.
Cogent also noted an opportunity to migrate T-Mobile wireline customers “from their legacy MPLS VPN solutions to modern Ethernet / VPLS or SD-WAN / DIA solutions for their corporate needs.”
The Cogent T-Mobile deal calls for Cogent to acquire “certain liabilities” associated with the wireline business. In addition, the deal calls for the parties to enter into a separate transit services agreement when the deal closes.
Cogent will IP provide transit services to T-Mobile for 54 months following the closing date and T-Mobile will pay Cogent $700 million for those services, with $350 million due in equal payments over the first 12 months after closing and $350 million due in equal payments over the remaining 42 months.
The deal seems to make sense for T-Mobile as it should enable the company to focus on its core wireless business and should generate cash that could be used to expand the wireless network.
The deal requires various regulatory approvals and is expected to close in the second half of 2023.