Covad, MegaPath to Merge

Covad Communications Co. and MegaPath Inc. announced last week that they have reached an agreement to merge their operations, a sign of ongoing consolidation in the competitive service provider marketplace.

Covad has more than 4,400 central offices in 45 states and 240 markets, and provides IP broadband services through its commercial and wholesale distribution channels. Covad wholesale partners include AT&T, Verizon Business and Sprint. MegaPath offers a variety of telecom services including hosted VoIP and managed security to more than 19,000 small, medium and enterprise customers.

The transaction will create one of the largest managed service local exchange carriers (MSLEC) in the United States. Covad and MegaPath are targeting small, medium and enterprise businesses and wholesale users. Together, the companies will sell Ethernet, DSL and T1 access, as well as managed IP data, voice and security services throughout North America.

Covad and MegaPath did not disclose the terms of the deal, since they’re both owned by private investors. The transaction is expected to close in the third quarter after it receives regulatory approval.

Before the ink could dry on the agreement, D. Craig Young, CEO of MegaPath and the executive chairman of the new company sat down with Light Reading. Young revealed that he expects additional consolidation in the competitive telecom industry. In fact, this is perhaps the first M&A for the newly merged company. ”We do expect more consolidation in the competitive carrier industry, and we will be one of the consolidators,” he said.

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