Over this past week, the Zayo Group executive team thoroughly reviewed our operational plan. When we started this review in the beginning of the week, the financial markets were in their worse shape in decades. As each day elapsed, the financial markets worsened. By the end of the week, dire warnings were being offered up by anyone with an opinion.
As I mentioned in my post last Friday, the entire Zayo team needs to fully accept the macro-environment we are in. It is what it is. We can’t control it. It would be a mistake to take it lightly.
There is a silver lining for Zayo. We are in good shape financially. We are generating healthy and growing EBITDA. We have cash to fund all of our committed capital projects. We can fund a healthy amount of discretionary capital–and hence have an extremely valuable and scarce resource. We can get to FCF break-even by 2Q09/3Q09.
Another silver lining for Zayo is that we are a roll-up of fiber based telecom companies. Our goal is to remain active as a consolidator. If we play our cards well, we have a tremendous opportunity to create value through M&A during this economic implosion. It won’t be easy–but our entire thinking is geared toward how we best position ourselves to exploit buying opportunities.
I don’t want to leave anyone with a false sense of security though. We will play defense first; offense second.
What do I mean by defense? We will be taking steps to ensure (as best we can) we can withstand a prolonged downturn. We will scrutinize our spending. We will be raising our thresholds for success based capital. We will prioritize near term profitability and free cash flow over long term growth.
It is time for leaders to emerge from all levels of our organization. Where are we spending money on things that we can do without? How do we lower costs of network augmentations, construction, and expansion? Do we have opportunities to generate additional revenue from what we are already doing? How do we work with our customers such that we can help them navigate through this environment while at the same time helping ourselves? How do we complete our big projects–like FTT (Fiber to the Tower) and integration–without delays, so that we can enjoy the benefits of them?
My advice to our team members is this: highlight to your management how you help us generate value in this environment. Be creative. Be proactive. Tell your management what you are going to do to help the cause–and then do it. You cannot control the financial markets. You can control how you personally respond to the adversity we all will face.
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your honest assessment is refreshing in my book………Best Offense is a Better Defense!! Survive First, Thrive Secondly