Cogent’s $1 Sprint Fiber Deal Spurs Delays While Wavelength Targets $2B Market
Cogent’s acquisition of Sprint’s wireline network for $1, including 20,000 miles of fiber, has driven integration delays, negative revenue growth, higher leverage, a dividend cut and EV/EBITDA contraction. Management expects Wavelength services to capture 25% of a $2 billion North American market at 95% incremental margins, fueling potential EBITDA upside.
1. Acquisition and Integration Challenges
Cogent acquired Sprint’s wireline network for $1, including 20,000 miles of fiber routes, data centers, IPv4 addresses and potential future payments from T-Mobile; integration has proven slower and more capital-intensive than expected, leading to negative consolidated revenue growth, higher leverage and a dividend cut that compressed its EV/EBITDA multiple.
2. Wavelength Service as Growth Engine
The Wavelength business monetizes long-haul fiber by selling dedicated, high-redundancy connections between data centers; management believes it can secure a 25% share of a $2 billion North American market, with incremental margins near 95%, meaning even modest uptake could drive substantial EBITDA gains.
3. Financial Position and Valuation Upside
Cogent is pruning unprofitable customers and considering data center asset sales and expanded IPv4 leasing to bolster cash flow; its legacy ISP arm typically trades at 15–20x EV/EBITDA, offering a valuation floor, while successful Wavelength scaling could trigger a significant rerating and asymmetric equity upside.