Network control

Network control

ENTREPRENEURS by Jean Gruss | Editor/Lee-Collier

TruWave Networks is building a fiber-optic network in Southwest Florida that could improve telecommunication services for business. It's an expensive proposition, but CEO Frank Mambuca has been through it before on a massive scale.

As group vice president of global operations for Level 3 Communications, Frank Mambuca oversaw a $350 million annual budget and 2,000 employees.

Level 3 is one of the giants of the U.S. telecom industry that built the Internet backbone to carry North American and European Web traffic in the late 1990s. In fact, Mambuca oversaw the laying of Level 3's giant fiber-optic cable across the Atlantic Ocean.

So what's Mambuca doing inside a small industrial park off U.S. 41 in Bonita Springs?

Call it another case of a high-powered executive who moved to Southwest Florida in search of a better lifestyle and later decided it's a great place to start a business. Mambuca left Level 3 in 2006 and recently started a telecommunications company called TruWave Networks with $25 million from a group of Naples investors.

Mambuca's ambition is still as big as his 6-foot-5-inch frame but he faces a slew of competitors just as the economy slows. Since the state deregulated telephone business in Florida a decade ago, there are now 45 telecommunication companies that serve businesses in Fort Myers and another 37 in Naples not counting Embarq, according to the latest data from the state.

Mambuca dismisses talk of a real estate-induced economic slowdown. "The area's a boom town," he says. He points to data from the U.S. Census Bureau that shows that Lee and Collier counties have nearly the same number of businesses as Hillsborough County, home to Tampa.

TruWave's edge, Mambuca says, will be in building its own fiber-optic network to compete directly against Embarq (formerly Sprint Florida). By building its own network, Mambuca says the company can control how much it charges and even sell excess capacity to rivals. The company already has 640 miles of the fiber planted along major thoroughfares in Lee and Collier counties.

To persuade businesses to sign up with TruWave, Mambuca says the company pledges better customer service than the competition. Owning its own fiber network means it can resolve any problems more quickly than rivals, he says. He's hired a team of former top Level 3 executives to help him grow the company from the handful of customers it has today.

Mambuca isn't stopping in Southwest Florida. He's scouting expansion beyond Lee and Collier's borders and hopes to raise $10 million to $20 million in a second round of financing later this year. "Sarasota's definitely on the radar," he says.

The counties north of Tampa - Pasco, Hernando and Citrus - as well as suburban areas of Orlando are particularly attractive because there's less competition and more growth.

TruWave's build-it-and-they-will-come strategy differs markedly from its competitors. When Florida deregulated the phone industry in 1996, most upstart companies leased lines from the large incumbent companies and resold access to business and residential customers with added services.

Fact is, the cost of building a fiber-optic network is substantial, especially in smaller markets such as Fort Myers and Naples. But Southwest Florida's population growth and the resulting business growth means the idea of building a network to rival Embarq's and focus only on business customers may now be more viable.

Mambuca recalls attending some of his children's school events and talking to parents who owned businesses around Southwest Florida and complained to him about their phone service. That's how he eventually met Douglas Lippert, a Naples investor who had sold his company, Lippert Components, for $55 million in 1997. Lippert is chairman of The Shoreline Group, a Naples investment group that includes Mambuca. (Through a TruWave spokeswoman, Lippert declined an interview request.)

Mambuca, 44, moved to Naples from New York City in August 2001, just one month before the terrorist attacks of Sept. 11. "We used to vacation down here," he says. As a top executive with Denver-based Level 3, Mambuca traveled extensively and could choose to live wherever he wanted.

But the years of travel and Level 3's increasingly stodgy culture drove Mambuca to consider building a telecommunications company in Southwest Florida. He resigned from Level 3 in mid-2006.

Initially, Lippert and Mambuca planned to create a wireless data-network company. But then came an opportunity to acquire Kent Technologies Lighting and Signaling, a division of Bonita Springs-based Kent Technologies whose business was installing streetlights up and down Lee and Collier's thoroughfares.

While it was installing lights, Kent was also laying fiber-optic lines along the rights of way. But Kent needed capital to continue building out its system and TruWave acquired it. Currently, TruWave has 640 miles of fiber in the ground and plans to lay "a bunch more," Mambuca says.

Control of the network

TruWave is just a few months old and has a handful of business customers such as medical implant manufacturer Arthrex and real estate brokerage company John R. Wood, both in Naples.

But Mambuca says there is plenty of business to gain in Lee and Collier counties, where he says the U.S. Census counts 26,000 nonfarm businesses. Of those, Mambuca estimates 10,000 are prospective customers that use telecommunications enough to warrant signing on with a business-focused provider such as TruWave. By 2011, Mambuca estimates that market will grow to 12,800 prospects. "I like to manage by fact, not by hunches," Mambuca says.

TruWave doesn't share financial data and Mambuca won't say when he expects the company to break even. Mambuca declines to quote prices for TruWave's services because he says each customer's cost is tailored individually and depends on a host of details such as proximity to the company's fiber-optic system. "All pricing is negotiated," he says.

Mambuca says there are no long-term plans to take the company public or sell to a larger company. When asked about investors' timeline for a return on their investment, he chuckles: "Who wants to exit paradise?"

Sunshine and stock options were a big draw to attract top talent to the startup, Mambuca says. Many of the executives on his team had worked at Level 3, including Mark King, who was a senior vice president of sales. King now executive vice president of sales and marketing at TruWave. Another Level 3 alumnus, Carlie Ancor, is senior vice president of engineering and operations.

Mambuca says Southwest Florida reminds him of the New York City area in earlier decades when there was only one company with the infrastructure to carry voice and data. He acknowledges that expanding the network will require additional capital and investors and a second round of financing is scheduled for this summer to raise as much as $20 million.

Mambuca is not concerned about reports of a slowing economy. "This is a great time to build and buy businesses," he says. For example, health care is one area that is doing well. What's more, the cost of doing business is less than it was during the boom.

Besides signing up business customers, Mambuca says TruWave intends to sell excess capacity to competitors who now have no choice but to go through Embarq. Mambuca says it's too early to tell which side of the business will be more successful, but he's counting on the "brotherhood" of smaller telecom companies to buy from TruWave.

TruWave may expand to contiguous counties such as Charlotte and Sarasota to follow its customers. "What we're seeing is customers based here that want to grow in contiguous areas," Mambuca says.

TruWave may hopscotch the Tampa Bay area, where Verizon is the leading telecommunications provider. Why is Verizon such a formidable competitor? "Because they have billions of dollars" with which to crush any competition, Mambuca says.

For now, Mambuca is partial to less populated areas.

REVIEW SUMMARY

Company. TruWave Networks

Industry. Telecommunications

Key. Southwest Florida will continue to grow and now's the time to be building and buying businesses.