Big Deal - $75 Million Infusion Helps Actel's 20-Market Rollout

Posted 06/2000

$75 Million Infusion Helps
Actel's 20-Market Rollout
By Ken Branson

For John Beck, president and CEO of Actel Integrated Communications Inc. (www.actel.net), this is the second time around the telecom startup track, but he thinks the track has changed for the better this time around.

The money people at Sandler Capital Management (www.sandlercap.com) and DB Partners, the venture capital arm of Deutsche Bank AG (http://public.deutsche-bank.de), seem to agree. They've just invested $75 million in Actel, which gives them a 52 percent stake in the Mobile, Ala.-based carrier. Actel will use the money to roll out services in 20 markets, including the seven it already serves. Actel currently provides service in Birmingham, Huntsville, Mobile and Montgomery, Ala.; Baton Rouge and New Orleans, La.; and Pensacola, Fla. It's new rollout will include Gainesville and Tallahassee, Fla.; Albany and Macon, Ga.; Shreveport and Lafayette, La.; Little Rock, N.C.; Chattanooga, Tenn.; and Austin, Texas.

Beck, who until 1998 was regional operations director for the Southeast at e.spire Communications Inc. (www.espire.com), says Actel is focused on small and medium-sized business customers, as e.spire was. "What has changed has been the technology," he says. "When we [early CLECs] first entered CLEC arena, we pretty much emulated the ILEC. The new technology means we can bring truly convergent solutions to the last mile."

Actel has three Class 5 switches, but is building the rest of its network with Lucent Technologies Inc.'s (www.lucent.com) PathStar and Stinger platforms and will use Cisco Systems Inc.'s (www.cisco.com) IP routing equipment. The company follows a smart-build strategy in that it leases fiber. However, it has built its own metropolitan fiber rings in Birmingham, Mobile, and New Orleans, and Beck says the company may buy indefeasible rights of use to fiber in other markets when market conditions justify such a move.

A CLEC building out its network in a Tier 2 city a few years ago might have spent between $5 million and $7 million in the effort, Beck says. He claims that Actel, because it isn't replicating the ILEC network and because it doesn't usually tear up the streets and lay out its own fiber, can do the job for $1.5 million.

Actel aims to serve businesses with between nine and 48 lines that, excluding data services, spend about $1,100 per month on telecommunications. Beck says he and his colleagues aim at second- and third-tier markets where their target customers haven't been well served by the incumbents or other CLECs.

"The initial pitch is, we're selling you on the company," Beck says. "We're going to provide a direct sales force, someone who will work with you, do a complete analysis of your needs, voice and data."

The technological change that has made life more promising for Actel also has presented the new carrier with some challenges. For example, Beck says, when he and his colleagues were laying out their initial strategy in 1996 and 1997, they planned an integrated voice and data network aimed at small business. But the boom in Internet and web-related applications caused them to adjust their plan to include web hosting.

Beck says he's sure Actel will have the superior claim when they make their pitch to small businesses in places like Chattanooga. In any case, Actel has brought on a new chief technical officer, Joe Zuccari, whose job will be to develop that side of the business.

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