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Posted: November 02, 2012

Top Company winner: Zayo Group

David Lewis

TELECOM

Zayo Group

Zayo Group may be the most precocious 5-year-old you will ever know.

Founded in 2005, Zayo Group already has annual revenue approaching $1 billion. Zayo revenue is growing at an annual rate of 12 percent, while EBITDA is growing 20 percent annually.

Just as important, Zayo Group owns 68,500 route miles of fiber network, and almost 4.9 million fiber miles; Zayo has 10,000 buildings on its network, 500 carrier hotels and data centers, and 2,500 cell towers.

Clearly, the company has racked up some serious numbers in a seriously short span of time.

"The market will need a ton more bandwidth every year, and you’ve got to have fiber in the ground to provide bandwidth," says CEO Dan Caruso.

You will recall that around a decade back, the fiber infrastructure industry looked decidedly tuckered out.

Debt and a slump in bandwidth demand had walloped the industry in the early part of this century. That’s when three icons of Colorado business history collided. ICG Communications had $100 million in debt and $30 million in cash, which it was burning at a rate of $8 million per month.

In 2004, an investor group including Caruso bought ICG Communications for a song, $8.7 million, and two years later sold it to Level 3 Communications for $170 million; including other distributions, ICG yielded a two-year return of 25 times invested capital.

Then Caruso and co-founder and John Scarano started Zayo.

"What we were able to observe first hand was that the industry was going through an inflection point right around mid-2005. If you look backward in time from that inflection point, that’s when the telecom meltdown was occurring – revenue shrinking, companies going out of business – it was hard to be in the bandwidth business," Caruso says.

"But sometime around mid-2005 that changed dramatically and all of a sudden companies started to grow again and they started to become profitable. But the investor community had lost so much money during the meltdown it just wasn’t paying attention."

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