Challenge

A fiber networking company suffered a major setback when two anchor customers collapsed and, in a chain reaction that was common to the telecom industry at the time, the company found itself unable to meet its obligations.  The firm’s primary creditor sought the advice of TMNG Global and others to assess the company’s deteriorating situation and determine a course of action that would turn the company around.

In our analysis of the potential of this company, we saw that no other provider came close to covering the state the way the company’s routes do. At the time, their network reached 14 of the 16 largest metro areas of the state, and no one else had facilities to more than three or four. It was clear that, in order to create a comparable network footprint over someone else’s facilities, customers would have to contract with several facilities providers. Thus, we proposed that the company go into receivership and that the creditor assume control, if most of the initial investment could not be recouped at auction. When the auction failed to produce the required funds, the creditor created a wholly owned subsidiary to acquire the business and asked TMNG Global to step in and manage the firm.

TMNG Global Solution

The combination of fiscal prudence, deep operations experience and superb sales skills is a potent mix that TMNG Global brings to any situation.  Our approach to the management of this company included steps that capitalize on the firm’s existing capabilities, improve its financial stability, fill in the gaps in its existing infrastructure, and provide for recurring revenue and continued expansion.  . 

The company’s business plan called for selling dark fiber leases to enterprises and telecom carriers over fiber routes connecting a state’s major metro areas.  Our initial assessment has also determined that, unfortunately, there were significant gaps in the links over its 800 route miles of fiber (with some gaps extending more than seven miles), and none of the regeneration huts where customers install their electronics were properly equipped with power, lighting, backup systems and other components to support operations.

During the following year, TMNG Global was able to secure a long-term contract with an 18-member consortium of independent operating companies (IOCs), which covered the initial construction and maintenance work, and the new subsidiary was able to fix the existing facilities. 

Momentum began to build as several high-profile customers availed themselves of the opportunity to lease fiber over routes from a single provider with unmatched coverage in the state.  These 20-year lease commitments from big users provided the large lump sum needed to get the firm on solid ground. 

The fiber network now connects more than 20 cities in the state, offers backbone connectivity to several cities outside the state and extends to termination facilities that connects to several carriers for access to a major metropolitan area.  Most recently, the company has contracted for construction of an extension that will link with a carrier interconnection facility that ties into several additional networks.  This link is slated to become operational in the second quarter of 2007.

TMNG Global is currently implementing the next phase in its long-range plan, which entails installation of electronics and operations support systems that will allow it to offer carrier transport services over its own “lit” fiber. The new fiber transport service, which does not entail switching or routing services, will employ dense wavelength division multiplexing technology (DWDM) operating 32 wavelengths per fiber at up to eight 1 gigabit-per-second circuits or one 10 gig circuit per wavelength. 

As TMNG Global grows the new transport business, it will continue to pursue the pay-as-you go policy that has marked its success to date by arranging contracts from customers in advance of ongoing extensions of the transport capabilities. And it will continue to apply other cost-saving strategies that have taken it to this point, including reliance on outsourcing for engineering and other services in the early stages of new business growth.

Along with approving the business expansion plan, the client has renewed TMNG Global’s contract for another three years with a mandate to act as broker to find a buyer for the firm.

Benefits to the Client

Repair, upgrading, and construction of facilities has been accomplished without having to draw on more than a few hundred thousand dollars of the committed additional funding from the investor, thanks to a revenue stream that has topped $40 million since TMNG Global took over management in early 2003. 

Significant long-term, high-volume contracts have been acquired with high-profile customers who represent a broad range of telecom service providers and users. Along the way the client has doubled its footprint, and is now strengthening its market position by entering the wavelength transport business with installation of new equipment and new routes. 

This turnaround story sheds important light on how a company rich in operations management experience can step in to guide operations-deficient entities to success. In this case, the entity was a bankrupt telecom provider, but TMNG Global’s management expertise can be applied with equally satisfying results to startup as well as distress situations where solid operations know-how is all it takes to exploit a promising business opportunity.