Zayo Group Holdings Inc (NYSE:ZAYO) has recently sold its dark fiber services to a total of seven customers, on it’s under construction Omaha to Dallas route. Furthermore, the company also revealed plans to expand its data center in Miami. It is expected that Zayo would double the center’s capacity, by 1Q2016. The center is responsible for collocation and interconnection services to some of the top gaming and content providers.
Just after 18-months of conducting operations, the Miami data center is already reaching the end of its capacity. It is estimated that Zayo has gained more than 35% unlevered returns on its initial investment in the center. Due to its strategic location, the center is also considered a key interconnection hub and even manages the Florida Internet Exchange. Stephanie Copeland, the president of Zayo’s zColo, stated that the center has received a lot of support from customers “out of the gate”. She also clarified that the strategic location of the center also opens a gateway to parts of Latin America.
The CFO at Zayo, Ken desGarennes, revealed that most of the development projects of his company are associated with signed customer contracts. However, the Omaha to Dallas projected was lacking in that suite, but the new sales would provide the company with the desired return profile. A statement from Matt Erickson, Co-COO at Zayo, revealed that the company expects a cash flow yield of 10%. He also stated that the management expects more sales on this route. Furthermore, the recent sales have brought the expected completion date to late 2016, rather than 2017. Once this project is complete, Zayo has also promised to construct dark fiber routes from Sacramento to Salt Lake City, Phoenix to Dallas and Washington to Atlanta. Currently, Zayo commands a market cap of $7.02 billion, which is significantly less than the industry average.
Zayo Group Holdings Inc (NYSE:ZAYO) was trading at $26.12, during the final bell of the September 23 session. The stock reported a decline of 1.40% in yesterday’s trading.
