Network Infrastructure

Integra Telecom Aims to Take Growth to the Next Level

By Paula Bernier, Executive Editor, TMC  |  February 04, 2013

The article originally appeared in the Jan./Feb. edition of INTERNET TELEPHONY.

2013 truly will be a year of new beginnings for Integra Telecom (News - Alert).

The Portland, Ore.-based competitive services provider has a new strategic investor, and is readying to introduce a new brand and website to better reflect the company’s strategy.

Like a lot of CLECs, Integra started life with a focus on small and medium businesses, to which it sold TDM-based voice and Internet access services. However, Integra is now focused on the execution of a strategy it set out about three years ago during its reorganization. That entails delivering a wider variety of networking and communications options, including cloud solutions, Ethernet and wavelength connectivity and managed services, to a broader customer target, which is a bit more up-market, explains Integra Telecom CEO Kevin O’Hara.

In the past, Integra’s customer base was dominated by single-location customers, but today 70 percent of its new sales involve multi-location deployments. And 61 percent of Integra’s revenue now comes from customers billing more than $1,000.

The change in strategy has enabled Integra achieve what O’Hara describes as modest revenue growth.

At the beginning of 2012, he says, Integra had a couple of financial objectives. In 2011, the company had significant cash burn due to investment, and EBITDA had started to decline. So it wanted to protect the downside by getting revenue growing, or at least stop the decline. It has been successful on that front.

Integra’s EBITDA expanded quarter over quarter in 2012 and will be greater in 2012 than it was in 2011, which hasn’t happened at Integra in a few years, says O’Hara, who joined the company in October of 2011.

Last year also saw Integra return to free cash flow on an unlevered basis.

The goal now is to realize greater growth.

O’Hara indicates that Integra’s new investor Searchlight Capital Partners, L.P., which late last year bought out Goldman, Sachs & Co.’s stake in the service provider, will be an important ally in achieving that growth. Searchlight, he says, is interested in being involved in Integra in a more meaningful way than its investors have been in the past. Because Searchlight owns the largest block of Integra, he adds, it’ll be able to drive behaviors of other investors to help the company build out its network and grow its business.

Integra already has invested more than $2 billion in its network. That network includes 3,000 miles of metro network fiber and 5,000 miles of long-haul fiber. These assets are most effective for businesses on West Coast, which may have limited business outside the region. O’Hara adds that Integra is now putting more focus on its underlying fiber network, which has been underused to date. About 2,200 buildings are now on the Integra fiber network – up 11 percent year to date and up more than 50 percent since the beginning of 2011.

About 16,000 additional buildings are within 2,500 feet of existing Integra fiber, representing an addressable monthly revenue of approximately $245 million, according to the company.

Because Integra’s fiber footprint it not ubiquitous, even within its region, the company is using Ethernet over copper to reach additional buildings with connections at 50- to 60mbps speeds. Integra can reach more than 400,000 additional businesses with Ethernet over copper solutions.

SMBs, dominated by blue collar industries, are a dominant part of Integra’s customer base. Wholesale is also an important focus for Integra. In 2012, the company made its largest sales in the government and health care verticals.

However, O’Hara says that Integra remains underrepresented in education, government and healthcare arenas – spaces in which Integra sees the potential for substantial upside going forward.

Integra is taking a different tact in reaching customers these days. While the company used to have multiple people covering a particular territory (the Seattle area alone used to have 52 sales people), O’Hara says that each Integra sales representative now is assigned a particular territory.

Edited by Braden Becker