Birch-OrbitCom Deal Now Official

Birch Communications recently announced that its acquisition of the customer assets of OrbitCom had closed. As a result of the transaction, Birch obtains more than 5,000 new customers from 14 states.

On May 7, Birch announced that it had agreed to acquire the customer assets of OrbitCom, a Sioux Falls, South Dakota-based telecom that provided voice, data, colocation, and hosting services to SMBs in the Northern Plains, Rockies, Southwest, and Pacific Northwest.

Before the deal could be finalized, a 31-day ‘pleading cycle’ had to expire. In such a cycle, the FCC, after agreeing to a streamlined application process, gives public notice of the acquisition and accepts comment for a limited time. If the agency finds no reason to halt the transaction after this time period is up, the deal can proceed to closing. The FCC process was only one of the regulatory hurdles the deal needed to overcome. Birch also had to file notification with South Dakota’s Public Utility Commission.

OrbitCom’s website has been changed to reflect the finalization of the deal. Customers who had data or email/webmail service will be directed to Go 180; other customers are directed to Birch’s site.

The OrbitCom acquisition is one of many that Atlanta-based Birch Communications has had recently. In 2014, it acquired Cbeyond for $323 million in cash. According to Birch, that was its 21^st acquisition since 2006, giving Birch national coverage as a cloud and managed services provider with 200,000 business customers. Assuming that the four transactions since Cbeyond were relatively incremental in size, Birch would have a roughly one percent market share (in terms of number of customers) of the roughly 27 million SMBs in the U.S.

With 25 acquisitions, it’s pretty obvious that Birch is gunning for market share in the SMB telecom market and is gobbling up as many local providers as it can find. With such a complex mix of customers and services, it’s hard to put a finger on what these transactions mean. It’s conceivable that some customers will be unhappy to be switched from a local provider that they have come to trust and be comfortable with. Other customers may see benefits in access to a larger network.

One thing is certain. If Birch Communications wants to gain significant SMB market share, it cannot acquire companies so quickly that the process becomes unmanageable. This would leave customers underserved and defeat the purpose of buying these companies. So far Birch has avoided the ire of regulators. Managing its acquisitions effectively will allow it to continue towards its market share goals.