Zayo carves out European biz to create standalone company

  • Zayo Group is making its European business a standalone company

  • It’s also carving out another, smaller unit that helps customers get connectivity outside of Zayo’s core North American and European markets

  • IDC analyst Jan Hein Bakkers said the restructuring will help Zayo’s NA and EU arms better address regional needs

Zayo Group’s North American and European businesses are breaking up. But rest assured, the separation is nothing if not amicable.

The company last week announced plans to make Zayo Europe, which operates a long-haul fiber network across eight countries, a standalone company. It’s also carving out a “very small part” of its business called Global Reach, said Andrés Irlando, Zayo Group president and COO.

He told Fierce that Zayo’s Global Reach unit helps customers both in North America and Europe get “connectivity services in parts of the world that are not our core business.”

“We help them with that through partnerships and some points of presence in a small number of company countries,” Irlando said.

He went on to say while Zayo’s North American and European businesses are “synergistic” in serving customer needs around the globe, they ultimately have “different strategic opportunities, different market dynamics and also different assets.”

In terms of route miles, Zayo’s European fiber network spans 2.2 million kilometers (~1.37 million miles), whereas the North American network is “significantly” bigger. Zayo in April unveiled a slew of infrastructure upgrades in the U.S., including an acquisition of a new long-haul dark fiber route connecting Washington, D.C. and Atlanta.

“So in thinking about how do we further accelerate growth, the idea was as separate entities, each could more effectively pursue its unique strategic and growth opportunities,” Irlando said. “Also, it gives us an opportunity to enhance the amount of management and leadership talent that’s focused on the two opportunities.”

News of splitting Zayo’s business came shortly after the company appointed Vodafone veteran Colman Deegan as the new CEO of Zayo Europe. Zayo expects to complete the separation of Zayo Europe and Global Reach sometime in the second half of 2024.

Jan Hein Bakkers, senior research director of European infrastructure and telecoms at IDC, told Fierce he views Zayo’s move as “a corporate restructuring with the aim of providing more flexibility and focus for the individual entities to address the regional needs, while positioning them better for any M&A and investment opportunities that may arise.”

“For now, entities will remain under the same ownership and work together to serve customers via the long-haul network as before,” Bakkers added.

Irlando explained Zayo is “the amalgamation of 50 some companies” via acquisitions it’s made over the years. The main challenge right now is “continuing to optimize” all those previously separate companies.

The European business is primarily concentrated in three markets: Dublin, London and Paris. These markets are “far more saturated and competitive” than those in Zayo’s North American arm.

Zayo Europe operates in Belgium, France, Germany, Ireland, Italy, the Netherlands, Switzerland and the U.K.

As for whether Zayo Europe intends to grow its footprint, Irlando said, “I think the European team will continue to evaluate new markets and new strategic opportunities, [but] I would not expect new markets to launch in the near term.”

“We also believe that for our existing customers, there will be minimal impact on them, our partners or on our employees,” he added.