Internet Service Provider Sovernet Will Be Sold

Sovernet, owned by Beverly, Mass.-based ATN International, said the deal calls for it to be combined with two other telecommunications companies in the process of being acquired by Bass’ Oak Hill Capital Partners. When completed, the merged companies will operate a total of 9,500 miles of super-fast fiber-optic network and 11 data centers across New England and New York state, Sovernet said.

“This transaction will allow us to do even more to serve our customers,” Richard Kendall, chief executive of Sovernet, said in a news release. Sovernet will combine with Albany, N.Y.-based FirstLight Fiber, which Oak Hill reached a deal in March to acquire from private equity firm Riverside Partners.

FirstLight Chief Executive Kurt Van Wagenen called the merger “very complementary to FirstLight’s existing network and capability. Once combined, our network will reach further into Vermont, New Hampshire and New York” and allow it to reach “more businesses and carriers in this region.”

The news of the sale follows recently reported weaker financial results in ATN International’s business unit that includes operations from Sovernet and its affiliated company, ION.

Last month, Sovernet owner ATN International, in releasing its second-quarter financial results, disclosed that it “recently began a review of strategic alternatives for our U.S. Wireline business in the Northeast.” The U.S. Wireline unit encompasses Sovernet and its New York state operation, ION, in addition to Beverly, Mass.-based Essex Tel. The phrasing was a stark hint the businesses might be for sale.

ATN International said the revenue in the U.S. Wireline business was down 13 percent to $5.8 million during the quarter and the company “concluded the assets of this business were overvalued,” which led to an impairment charge and “write down (in) the value of these assets.”

A spokesman for ATN International said the lower revenues “primarily” occured at Essex Tel, but the impairment charge and write down related to Sovernet and ION.

Founded 21 years ago to provide dial-up internet service to residents in southern Vermont, the company expanded into offering telephone service in 2000 and in 2006 was sold to ATN International for $12.7 million. At the time of the sale 10 years ago, Sovernet reported $13 million in revenue and $2.4 million in operating income.

In 2008, Sovernet bought a majority stake in ION, an Albany, N.Y.-based telecommunications transport services provider that expanded its fiber-optic footprint. Sovernet subsequently was granted $33.4 million in government stimulus funding in 2010 to build a “high-capacity” fiber-optic network to serve educational institutions and businesses, extending its reach across Vermont.

“It was really (because of) the stimulus funding that we were able to go to a whole other level,” said Sharon Combes-Farr, director of marketing at Sovernet. Nonetheless, the company still provides traditional copper wire landline telephone service to 17 communities, including residential customers in White River Junction and Lebanon.

“Even as we expand our fiber network and other data services and voice, we continue to serve and grow our copper customer base,” she said.

She said the company employs between 70 to 75 people at offices in Bellows Falls, Vt., and Williston, Vt.

Combes-Farr said she didn’t know if the sale of the company would lead to layoffs of employees.

“Those are conversations we’ll be having a future time,” she said, noting the company is “run very lean.”

ION separately was awarded nearly $40 million under the 2010 American Recovery and Reinvestment Act to build a “middle mile” for a 1,400-mile fiber network to serve “anchor” institutions.

In July, Oak Hill announced it was acquiring Oxford Networks, a fiber optic service provider operating in Maine, New Hampshire and Massachusetts, from private equity owners Novacap and Bank Street Capital Partners. Oak Hill will combine Oxford Networks, FirstLight Fiber and Sovernet into a single enterprise that will provide high-capacity telecommunications transport in New York and New England.