June Interview
to use us as a platform to make continued investments in the infrastructure space, and they were willing to pay our shareholders the most money to do that.
VB: How will that change Lumos? Biltz: At a strategic level, all the capital that we have invested we were able to raise through debt. I’ve raised no equity since I’ve been here … Between cash that we generated from the business and new debt facilities, we were able to invest $425 million [in the company’s transformation]. For us to
we can offer customers a broader reach. We think about scale being density, not geo- graphic reach. If we could find a business, and we’ve looked at some, where if we could find a geography where the fiber was dense enough and we could replicate our “go-to- market” strategy, we would entertain it, but they’re few and far between … The data- center investment strategy doesn’t need to be tied to the fiber strategy. We just acquired a [data center] business down in Charlotte. We really like that business. We acquired a fiber network in North Carolina as our
“EQT created a $4 billion infrastructure fund, and we’re going to be the fi rst investment in that fund.” — Tim Biltz
market share. While we have nice market share in what we call our core markets, or the original markets the company was in, we felt that we needed a greater market opportunity. We had a customer, HCA, [which wanted an Ethernet network connecting key facilities and offices to its Richmond data center. Lumos cre- ated] what I call a boutique network in Richmond that was able to service HCA. I call it a boutique because there wasn’t a lot more we could do with that network. It was pretty much a private network for them. But had we not gone into Richmond in that manner, we would have never had the opportunity to bid on a project with a wireless carrier that ultimately brought us a substantial mul- tiyear contract to build out a network in Richmond and Norfolk. So taking care of HCA led us to the opportunity to bid on a bigger project … We went from being a boutique provider in Richmond and nonexistent in Norfolk to being what we call the lead competitive fiber provider ... What that did is, with about a 10 percent increase in our total miles, it [increased] our market opportunity [by 65 percent], and that gave us the path to growth.
grow to the next level, the company was going to have to use equity [to keep the company within appropriate leverage ratios, its mixture of equity and debt]. I think the opportunity that it presents us is to begin to scale our acquisition strategy. We’ve done a couple [of acquisitions]. We did those with cash, but they were relatively small. I would suspect that we will continue our investment strategy by redeploying our cash flows into good projects that we grow organically, but I think we will be more apt to participate in out-of- market acquisitions to scale the business.
VB:Would those be within your existing area or would you be looking to grow outside of your territory now? Biltz: I would say ... the value of the network is in its contiguous nature so that
22 JUNE 2017
move to broaden our reach. If we found a data center in a market that wasn’t exactly [in our footprint], but was in close proximity, it doesn’t have to be on the network for us to make that investment.
VB: Tell us about your moves into Richmond and Hampton Roads. Biltz: Flashback to 2012 and ’13 … We asked four questions. What’s selling? What’s not? What are we making money on? What are we losing money on? ... It became apparent that, for us to grow the business, we had to do two things. One, we had to work through a technology evolu- tion, going from an old technology … in our enterprise business to one of Ethernet and dark fiber and fiber. Second, for us to grow … we were also going to have to improve
VB: That brings me to talking about the cables in Virginia Beach; you didn’t know about that [before expanding into Hampton Roads]? Biltz: I was lucky, just lucky. I’ve been lucky my whole career, but that was the luckiest one … [The planned undersea cable connections] changed the profile of the company. We are connected to many data centers in the Ashburn area. We were fortunate in that the state of Virginia is to be the largest internet access point in the world … I think you are going to see substantial data-center development in the Norfolk area. You’re going to see substantial traffic. We have some express routes that we hope to provide to those carriers that want to get from Virginia Beach into Ashburn and to other access points throughout the country. It’s very exciting for the region.
VB: So tell me about your strategy. I have heard something about an alternative route to Ashburn, correct? Biltz: If you think about those big pipes going international, whether they’re com-
Photo by Mark Rhodes
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