PAETEC-Cavalier Combo Positive for Channel

PAETEC Holding Corp.'s pending acquisition of Cavalier Telephone Corp., a full-service telecom company serving the Mid-Atlantic, Midwest and Southeastern United States, is expected to have a positive impact on the companies' indirect sales channels, according to the respective channel chiefs and some partners PHONE+ spoke to following announcement of the
transaction on Monday.

Buying Cavalier pushes PAETEC from about $1.58 billion in annual revenue to $1.95 billion, executives said on Monday, when the deal was announced. PAETEC will pay $460 million in cash and, in return, own valuable assets including Cavalier's Intellifiber Networks division. PAETEC will boast 10,609 metro fiber-route miles and 37,023 total fiber-route miles when the
deal closes.

PAETEC Channel Chief Donna B. Wenk told PHONE+ the acquisition will further strengthen both companies' agent programs. "Cavalier has had a successful channel program and their agents will share in our larger nationwide network and product portfolio," Wenk said. "For existing PAETEC agents, the fiber assets that Cavalier has will help our PAETEC partners serve high-bandwidth businesses with new options for access and transport."

Michael Gough, the new channel chief at Cavalier, said his team is "excited about the merger and look forward to working with such a strong organization." However, he noted that until the transaction closes, which could take up to six months, it's business as usual. "For now, there are no immediate changes to my team or our direction, nor do I see any forthcoming any time soon. My current direction is 'business as usual' and driving sales for September and meet our revenue objectives," he said.

PAETEC runs its channel in a distributed manner. There are four geographical regions with a regional president responsible for all sales and service in that region. Under each regional president is a vice president of channel sales who is responsible for channel sales and management of agent partners in that region. Wenk provides coordination and consistency among the regions.

Cavalier relaunched its channel program in 2010 with Gough at the helm. In the short time he has run the channel, Gough has revamped the agent contracts, beefed up the staff and systems supporting the channel.

Nevertheless, agents also see the upside in the deal. "We see consolidation among CLECs in a positive light in general," said Adam Edwards, president of Telarus Inc., which is a master agent for both PAETEC and Cavalier. "In this particular instance, we're thrilled to see two carriers with a channel focus combining. The increased network density should lower costs for PAETEC
as well as reduce downward pricing pressure in the shared footprint."

Another PAETEC agent told PHONE+ off the record he hoped that Cavalier's assets would help PAETEC better compete against lower-cost providers, such as ITC/Deltacom, in the Southeast region.