Cogent at Global Communications Infrastructure Conference: Strategic Growth Plans

On Tuesday, 16 September 2025, Cogent Communications (NASDAQ:CCOI) took center stage at the Global Communications Infrastructure Conference. CEO Dave Schaeffer outlined the company’s current challenges and future strategies, highlighting both the hurdles faced with the acquired enterprise business from T-Mobile/Sprint and the promising expansion of its wavelength services. The company is committed to stabilizing its legacy businesses and leveraging Sprint network assets to enhance shareholder value.

Key Takeaways

• Cogent is divesting selected data centers to generate capital for stock buybacks, dividends, or debt reduction.
• The wavelength services business is poised for rapid expansion, targeting a 25% market share by 2028.
• The acquired enterprise business is stabilizing, with a focus on returning to a 20% margin over the next two years.
• The company aims to expand EBITDA margins by approximately 200 basis points annually.
• Cogent is addressing cost reductions within the acquired Sprint business, targeting $20 million in savings by the end of 2026.

Financial Results

Cogent’s financial outlook is centered on accelerating revenue growth through its wavelength services. The company aims to expand its EBITDA margins by around 200 basis points each year, a rate achieved historically before the Sprint acquisition. Capital expenditures are expected to be approximately $100 million annually, with capital lease principal payments around $40 million, reducing the total cash outlay to $140 million.

Operational Updates

The company is actively repurposing Sprint assets, including 19,000 route miles of intercity fiber, 1,200 route miles of metropolitan fiber, and 482 central offices. These assets are being transformed into data centers, expanding Cogent’s footprint from 55 to 180 facilities. The divestiture plan includes selling or leasing 1 million square feet of data center space.

Future Outlook

Cogent’s wavelength services are a key growth driver, with a revenue run rate of $36 million annually. Competing in a $2 billion market, Cogent is confident in capturing a 25% market share by mid-2028. The legacy Cogent businesses are showing mid-single-digit growth, while the net-centric segment contributes significantly to traffic and revenue.

Q&A Highlights

During the conference, CEO Dave Schaeffer emphasized the strategic importance of the Sprint network’s unique advantages, such as faster provisioning and lower pricing. He also noted the ongoing efforts to reduce costs within the acquired Sprint business, aiming for a 20% margin restoration over the next two years. Schaeffer highlighted the potential for recurring high-margin revenue from the repurposed Sprint network.

In conclusion, Cogent Communications is navigating its challenges with strategic initiatives aimed at long-term growth and shareholder value. For more details, please refer to the full transcript below.

Full transcript - Global Communications Infrastructure Conference:

Kevin Kwan, Managing Director, RBC Capital Markets: Everyone, Kevin Kwan, I’m a Managing Director at RBC Capital Markets covering communications infrastructure, and we’re thrilled to have Dave Schaeffer, Founder and CEO of Cogent Communications Holdings Inc. Dave, thanks so much for making the time.

Dave Schaeffer, Founder and CEO, Cogent Communications Holdings Inc.: Hey, Kevin, thank you very much for inviting me. Thank RBC for a great forum, and most importantly, thank investors for taking time out of their day to hear what we have to say.

Kevin Kwan, Managing Director, RBC Capital Markets: Excellent. Dave, it’d be great to hear a little bit about, maybe you could spend a minute just talking through the outlook for each of your end markets. Corporate, enterprise, net-centric business. Obviously, you’ve been making a big investment on the wave side, on the heels of the Sprint acquisition. If you could walk us through what those end markets, the growth rate in those end markets, that would be great.

Dave Schaeffer, Founder and CEO, Cogent Communications Holdings Inc.: I guess I’ll go the ugly, the not so ugly, and then the good.

Kevin Kwan, Managing Director, RBC Capital Markets: Okay.

Dave Schaeffer, Founder and CEO, Cogent Communications Holdings Inc.: Probably the worst segment within Cogent is the enterprise business, which is the business that we acquired from T-Mobile when we bought Sprint. These are large multinationals, predominantly off-net, who had historically been buying a variety of legacy products and using a combination of DIA, or Dedicated Internet Access, and MPLS VPNs. When we acquired the business from T-Mobile, the three previous years, that business was declining at a compounded rate of 10.6% a year. We actually accelerated that rate of decline to nearly 20% per year for the subsequent two years as we purged unprofitable products and unprofitable locations. That business now has stabilized at basically zero margin and a negative 1-2% growth rate. We still do have costs that we are taking out of the acquired Sprint business and should be able to return that business to about a 20% margin over the next two years.

The second part of our business is corporate and net-centric legacy Cogent products. On the corporate side, that business had grown for a 15-year period from 2005 through 2020 at over 11% a year. When the pandemic hit, that growth rate turned negative to negative 9%, and it has since rebounded to kind of a 3-4% growing business. Along with those mid-sized businesses that are typically located in skyscrapers and central business districts of major cities, we also have a wholesale or net-centric business where we sell bulk internet connectivity and data centers globally. 87 countries, 1,870 data centers. That segment generates 97% of our traffic and had been growing pre-pandemic at about 3% year over year. With everybody being locked down and streaming, that growth rate accelerated to positive 26% and has since stabilized at about 8-9% growth.

That is predominantly an on-net business, so the combined legacy Cogent segments are growing in mid-single digits around 5% with about 100 basis points a year of margin expansion. Layering onto that is a completely new product that is sold predominantly to our net-centric customers. That is optical transport or wavelength services. When we acquired the business from T-Mobile, we got two things. We got this broken enterprise business that I described and were paid $700 million over 54 months to take that business. We still have a net present value of payments due from T-Mobile as of the end of the second quarter of $244 million. Those payments continue through the first quarter of 2028.

The second thing that we acquired was the physical Sprint network that was comprised of 19,000 route miles of intercity fiber that Sprint had constructed and was owned by Sprint along railroad right of way, 482 buildings that were central offices for Sprint, and 1,200 route miles of metropolitan fiber. We have spent two years repurposing those assets. We took the fiber network, we interconnected it to our metro networks and reconfigured those networks and are now able to sell wavelength services, point-to-point optical transport at 10 gig, 100 gig, and 400 gig in 938 locations, and we can deliver those services in 30 days or less. We are competing with two other major players in a $2 billion addressable market, and our revenue run rate last quarter was at $36 million annual or about $9.1 million a quarter.

It’s growing rapidly, but it is a brand new startup business inside of Cogent. The second thing we invested capital in were the buildings themselves, converting them from telephone central offices into data centers. We acquired 1.9 million square feet and 230 megawatts of inbound power coming into buildings that were all configured for negative 48 DC power in order to power phone switches. There were nearly 23,500 bays of phone switches resident in these sites that we removed. We have converted 125 of those sites into data centers. We have expanded Cogent’s data center footprint from 55 to 180 facilities. We have approximately 2 million square feet and about 212 megawatts of power AC in that footprint. We’ve earmarked 24 of those facilities for divestiture, and we are looking to sell off 1 million square feet at 109 megawatts.

That’s kind of a complete encyclopedic view of where Cogent is today.

Kevin Kwan, Managing Director, RBC Capital Markets: Great. Thank you for all that detail. Maybe just to dive in a little bit deeper on the wave side, because I know investors have been very focused on that. I know you’ve put out some ambitious targets to get to 25% market share against that $2 billion TAM that you mentioned. Can you just walk us through what are the KPIs that we should be looking for? Is there a lag between the install and revenue conversion? I think the last quarter there was some confusion in the market around how quickly that ramp was in terms of the revenue coming online, and just help us to bridge how you get to the $500 million over the timeline you’ve outlined.

Dave Schaeffer, Founder and CEO, Cogent Communications Holdings Inc.: Yeah, so the first thing we had to do was wave-enable a network that had been sitting dormant for a decade. We had to interconnect that network to our metropolitan network and reconfigure that network to serve targeted data centers. We ended 2024 with 802 facilities connected. We have expanded that to 938. Across that footprint, we compete with two primary competitors, Lumen and Zayo. The global wavelength market is about $7 billion annually. About $3.5 billion of that is in North America. Of that $3.5 billion, $2 billion is intercity, $1.5 billion is metro. We are primarily focused on the intercity segment. We will win business based on five competitive advantages. We have a bigger footprint of locations than any other provider. We can provision faster at any of those locations.

90% of the physical routes that we operate are unique to us and are not shared with other operators. We will be able to sell at a lower price point than our competitors because we got these assets effectively for free. To date, we have been offering about a 20% discount to market. We may find it necessary to go to a greater level of discounting, but at this point, we have not needed to discount more extensively to gain orders. Finally, and maybe the most important, is we need to be more reliable than our competitors. That reliability will come from the way in which the Sprint fiber was deployed. It was deployed along railroad tracks, deep buried, and armored cable, much more secure than along public highway and plastic conduit.

While our evidence is somewhat anecdotal based on the dark fiber that we have bought from 375 different suppliers around the world, on average, this network has about one-seventh the number of cuts per mile per year as the competitor. We believe that will translate into greater reliability. Based on those five competitive advantages and the fact that Cogent has pre-existing relationships with virtually all of the buyers and has credibility as the world’s largest transfer provider, we think our 25% market share target by mid-year 2028 is conservative.

Kevin Kwan, Managing Director, RBC Capital Markets: Great. No, that’s super helpful. Maybe to dovetail, I know you mentioned the conversion of some of the switch centers that you acquired from Sprint. You’ve been very transparent that you’ve been in market, trying to market some of those facilities. Can you give us an update on where you are in that process? There has been some focus on just the dividend yield in your stock and how you think about, you know, capital allocation. If you are successful in selling off some of these switch centers, how do you think about applying those proceeds?

Dave Schaeffer, Founder and CEO, Cogent Communications Holdings Inc.: Yeah, sure. There are three separate questions in that question, Kevin. The first one is that we today have a fleet of 180 data centers. We have identified 24 of the larger facilities as ones that we are unlikely to be able to fill up with our sales model. For that reason, we are looking to divest of them. That divestiture can be in one of three forms: an outright sale, a long-term lease, or a joint venture. As of the end of Q2, we had six LOIs from counterparties in hand, some ranging for the entire footprint, some for as few as one facility, some for as much as our full ask price, some for a discount. None of those had progressed to the point where there was a binding agreement with a meaningful deposit. They are still in negotiation.

We have subsequent to the quarter gotten some additional LOIs in hand. These facilities were not being converted until June of 2024. In June of 2024, we laid out a plan that was going to cost $100 million and take a year. We spent the $100 million and we completed the conversion as of the end of June of 2025. For the past 80 days, these facilities have sat converted but unsold. During that period, we did talk to counterparties and we’re accelerating those discussions. We hope that we will be able to monetize these. This is not Cogent’s core business, and it will result in net cash proceeds. Those cash proceeds should be used for one of three purposes: to either buy back stock, issue a dividend, or reduce leverage.

As part of the Sprint acquisition and integration, we spent $408 million more in capital cumulatively in the form of capital and principal payments on capital leases than we would have if we had not acquired Sprint. We generated $268 million more of cumulative EBITDA. That differential was used to convert these facilities. We will delever or generate incremental one-time capital through this process, but the real value creation comes from the repurposing of the Sprint network in order to generate recurring high margin revenue, which will accelerate Cogent’s growth both in revenue and, more importantly, help us expand our EBITDA margins at about the 200 basis points a year we had historically achieved pre-acquisition of Sprint.

Kevin Kwan, Managing Director, RBC Capital Markets: Great. That’s super helpful. Can you talk a little bit about just, is there a continuing integration payment drag that is continuing, and when does that sunset? Can you talk a little bit about the capital intensity? I know you said you spent $100 million to upgrade and you’re through that cycle. What does that capital intensity curve look like moving forward?

Dave Schaeffer, Founder and CEO, Cogent Communications Holdings Inc.: Yeah, we are still able to take out about $20 million in annual expenses out of the acquired Sprint business that’s directly attributable to those customers. The pacing of that cost reduction is somewhat limited by the contracts that we acquired and will be achieved between now and the end of 2026. Secondly, we have the decline in capital intensity. Our capital should be about $100 million a year, inclusive of expansion capital, and about $40 million in principal payments on capital leases. Cash out the door, whether it shows up on the cash flow statement as CapEx or principal payments, is cumulatively about $140 million, down from the roughly $225 million run rate over the past 12 months.

Kevin Kwan, Managing Director, RBC Capital Markets: Great. No, that’s super helpful. When, you know, maybe taking a step back and on the corporate side of the business, we’ve sort of moved through COVID. We have a return to office. What does that growth trajectory look like on that side of the business? What are you seeing in terms of return to office and uptake on bandwidth into the buildings?

Dave Schaeffer, Founder and CEO, Cogent Communications Holdings Inc.: We have a little over a billion square feet of multi-tenant office space and about 1,860 skyscrapers across North America. That business had grown consistently at about 11% a year, fell to a negative 9%, and is now only growing at about 3-4%. The vacancy rate in our footprint has over-tripled from about 6% to over 18%. While we have seen net absorption turning positive, that positive net absorption in office space is at a very de minimis rate. We’ve been stuck at about 18% vacancy in North American Central Business District office space for the past two years. If you had asked me that question two years ago, I would have thought the rebound from the pandemic would have been more quick and would have been also back to the original pre-pandemic levels.

Where I sit today, we’ve been stuck at this 3-4% growth rate now for the past two years. While it is improving, it’s at a very low pace.

Kevin Kwan, Managing Director, RBC Capital Markets: We have a minute for any questions in the room. All right, I see we have 0:20, so I’ll give you back your time, but thank you, Dave.

Dave Schaeffer, Founder and CEO, Cogent Communications Holdings Inc.: Okay, thank you, Kevin. Thank you all very much.

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