Internet services provider EarthLink on Monday announced it has agreed to purchase debt-ridden telecommunications player One Communications for $370 million. The deal total includes EarthLink's payment of $285 million in debt owned by privately held One Communications.
Shares of EarthLink (NASDAQ: ELNK) were down 31 cents, or 3.45 percent, to 8.67 in early afternoon trading. Through Friday's close, EarthLink stock was up 8 percent for the year. ELNK actually has been relatively stable all year, trading between a 52-week high of 9.35 and a 52-week low of 7.85. One reason shares may be taking a hit is because Atlanta-based EarthLink is cutting its share dividend to 5 cents from 16 cents (on a quarterly basis) to help pay for this acquisition, as well as future ones. One Communications, based in Burlington, Mass., has about 113,000 small and medium-sized business customers in the Northeast, Mid-Atlantic and Midwest regions of the U.S. EarthLink, which is trying to rebrand itself as an ISP for businesses as its consumer dial-up business continues to dwindle, said it would integrate One Comm into its new EarthLink Business unit. "We will now have a fiber-based IP network that covers a substantial portion of the key business markets across the eastern half of the United States, as well as substantial revenue and EBITDA scale in our strategic line of business," EarthLink Chairman and CEO Rolla P. Huff said in a statement. Earlier this month, EarthLink completed the purchase of ITC^DeltaCom, another regional business-focused telco services provider, for $524 million. In late October, EarthLink reported a fiscal third quarter net income of $21.4 million, or 20 cents a share, down from $29.9 million, or 28 cents a share, a year ago.
Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.