By Dave Marino-Nachison (TMF Braden)
March 13, 2000

Shares of telecommunications and Internet services company CoreComm Ltd. (Nasdaq: COMM) rose slightly this morning after the company agreed to buy Midwestern Internet service provider Voyager.net (Nasdaq: VOYN) in a cash-and-stock deal valued at approximately $540 million based on Friday's closing prices. Voyager.net stock, meanwhile, quickly popped more than 12%.

The deal's terms state that CoreComm will exchange 0.292 shares of its stock plus $3 in cash for each Voyager share. That values Voyager at $17 per share, a 21% premium to last week's close. Essentially, CoreComm will be paying about $1,500 for each of Voyager's subscribers, which, like CoreComm's, purchase a range of services -- digital subscriber line (DSL) broadband, cable modem, dial-up Internet access, Web hosting, electronic commerce, and more -- for both home and business. Taken another way, CoreComm paid about 11.4 times Voyager's 1999 sales.

Was that a deal? Hard to say so soon, but financially it seems like a decent buy considering that ISP competitor Prodigy (Nasdaq: PRGY), for example, is trading at similar multiples as Voyager.net (though Prodigy is three times larger). How it fits strategically in terms of CoreComm's long-term picture is probably a better question. Busily working to expand in terms of subscribers, footprint, and services offered, CoreComm has actively sought to trade its briskly rising equity for new business opportunities: Last week the company shelled out about $900 million for ATX Telecommunications Services, an East Coast telecom with 20,000 business customers.

Look for CoreComm, which hopes to distinguish itself by marketing its "Smart Local Exchange Carrier" one-bill telecommunications and Internet services product, to continue buying when it can as local and regional ISPs seek partners and weigh the economies of internal or external growth. Though the dynamics of providing and marketing integrated services to residential customers instead of businesses are quite different, the market still presents a huge opportunity, and other telecoms will be following suit. For an up-and-comer like CoreComm, hitting the acquisition trail might be the surest way to hit the big time short of selling itself out.

CoreComm, at this point, is probably best known to Ohio users -- it's the only state in which CoreComm's new eChat combination telephone/Internet package is available. But investors looking for growth stories in the integrated telecommunications services space should nevertheless consider CoreComm among potential investments, as well as continually investigating up-and-coming "mom-and-pop" providers a la Voyager that could be buyout fodder.

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