Here were my first quick (and now belated, sorry) impressions that I’ve been sharing to some other fund managers about Neutral Tandem’s acquisition of Tinet:
I like the TNDM deal with Tinet…hard to argue that it’s not an intelligent use of cash. Fits strategically, moves EE forward by light years, which is important for network effects, and total earnings power goes up, too. Market didn’t seem to get it when first announced, but nothing new there, I suppose, and things seem to be coming around a bit since.
At a high level, on the legacy business, think there are two camps on TNDM among fundamental investors…guys who think pricing is the most important factor when customers select their service provider, and those (like me) who think the number of switches is the relevant factor. Peerless is much more a beneficiary of Verizon Wireless’ policy to have two suppliers for everything than a real threat to TNDM. At least to me.
Been asking around my old telco circles about Tinet, but they’re largely an unknown here in the U.S. I can’t see them competing with Cogent on price for transport, but they may not need to, either if Ethernet Exchange grows. EE is not real well known either, at least among my contacts, but I can’t say I was surprised to hear that, as it probably underscores how young that market it.
So, some uncertainty continues at TNDM, though arguably less than a month ago, and still not much risk. I added shares after the Tinet deal, and intend to keep holding until shares reach a target range much higher, all things being equal.
Here’s a link to more info about the deal on the TNDM IR site.
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