Centerline Solutions, a Golden, Colorado-based company that specialized in developing, designing, building and maintaining wireless networks, closed its doors last week, laying off 202 employees and filing for Chapter 7 liquidation under the U.S. bankruptcy code.
The news was surprising, because Centerline was involved in high-growth areas of wireless such as 5G wireless communications, small cells and fiber. Centerline, begun in 2011 as a combination of ATECS and MC Squared Holdings, grew nearly 300 percent from 2014 to 2016 through a series of eight acquisitions and was named a top telecommunications company (#18) by Inc. 5,000.
Most recently, in 2016, Centerline expanded to the Southeast, purchasing Florida-based UCI Construction Services. In order to complete the UCI transaction and prepare Centerline for future growth, the company was recapitalized with an equity investment from Concentric Equity Partners and a new credit facility led by Bank of the West’s Commercial Banking Group.
Ian Ross of Concentric Equity Partners, told AGL eDigest, Centerline was closed because it could “never make money. There are only three customers (the tier one carriers) and they are very tough on their supply chain,” he said. “They want to squeeze all the margin out.”
Centerline also had trouble getting their customers to pay them on time, with payments sometimes delayed up to 120 days, according to Ross.
“We have to do a lot of work up front, millions of dollars’ worth of work for our customers, before we were even allowed to invoice them, and then you wait 30, 60, 90 days,” Ross said.
Centerline grew through acquisitions. UCI Construction was Centerline’s eighth purchase since its founding. Prior to UCI, its largest acquisition was Cascadia PM, a Washington-based leading provider of wireless project program management, in January 2015. Other acquisitions from included IDC Joint Venture (Hawaii, August 2015), Wireless Limited (Colorado, May 2015) and KbarM Consulting (Idaho, August 2014).
With the acquisition of UCI, Centerline increased its number of employees to a high of more 420. But by the time it had closed its doors, the staff had shrunk by a half.
“We tried to expand the business to serve more customers and provide more services, but we couldn’t make money at it so we ended up contracting,” Ross said. “There are only a few key customers, and they have lots of power. There are low barriers for entry into the industry for service providers to build out this infrastructure.”
Cutthroat competition among telecom service providers also took its toll on Centerline’s bottom line, as thousands of wireless telecom infrastructure service providers vie for the business of four (sometimes three) tier one carriers.
“An established company with insurance, safety, accounting and training has a hard time competing with three guys and a truck,” Ross said. “The carriers don’t see the value. They just give the job to the lowest bidder.”