Broadwing sale ends rough flight

The fanfare with which Broadwing was launched three years ago was but a distant memory last week as the company announced the sale of its broadband division for a bargain-basement price.

TV commercials featuring Dennis Hopper and images of swooping hawks heralded the company's debut, but last week a straightforward press release announced that investment firm C III Communications is buying Broadwing for $129 million. In 1999, local exchange carrier Cincinnati Bell acquired long-haul carrier IXC Communications for $3.2 billion. The merged company changed its name to Broadwing.

C III is not only acquiring the old IXC but also the much-expanded fiber-optic network that Broadwing created.

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The fanfare with which Broadwing was launched three years ago was but a distant memory last week as the company announced the sale of its broadband division for a bargain-basement price.

TV commercials featuring Dennis Hopper and images of swooping hawks heralded the company's debut, but last week a straightforward press release announced that investment firm C III Communications is buying Broadwing for $129 million. In 1999, local exchange carrier Cincinnati Bell acquired long-haul carrier IXC Communications for $3.2 billion. The merged company changed its name to Broadwing.

C III is not only acquiring the old IXC but also the much-expanded fiber-optic network that Broadwing created.

The cost of that buildout and maintaining a business that generates little cash on its own led to much of the carrier's financial troubles. Last year Broadwing used $39 million in cash beyond its revenue to run its business. This is cash that came from sister company Cincinnati Bell. With debt totaling $2.5 billion due this year and next, changes were necessary.

C III is an investment firm that since its inception last year has acquired a wireless tower management company and cable service provider assets. The firm is acquiring Broadwing's nationwide 18,700-mile fiber-optic networks, 1,000 corporate data and 150,000 voice customers, the Broadwing brand and an undisclosed amount of debt.

Broadwing calls this a "sale in place," which essentially means that Broadwing's operations will not change. C III is expected to keep all the carrier's 1,100 employees.

It became clear to industry watchers late last year that Broadwing would have to make changes to avoid bankruptcy. In October the company announced it was reorganizing its broadband division, which included letting 500 employees go and selling its wholesale voice business.

Selling Broadwing was the best move because it will create value for Cincinnati Bell while bringing in some cash, says Tom Oshea, chief of staff at Broadwing. "The transaction will be transparent to employees and customers," he says.

Industry experts are not so sure.

"Any time the assets and customers are sold, the potential for severe disruption exists and enterprises should take precautions," says Lisa Pierce, an analyst at Giga Information Group.

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