With its acquisition of SureWest Communications completed yesterday, Consolidated Communications is now in position to pursue the broadband and video growth strategies it outlined back in February when it announced plans for the acquisition. At that time Consolidated also indicated potential investment areas, including deploying capital to support wholesale opportunities and potentially expanding its footprint.
Growth is an important goal for Consolidated, which saw a revenue drop of 1.4% to $93.4 million between first quarter of 2011 and first quarter of 2012. The company is the incumbent telco in parts of Illinois, Texas and Pennsylvania and like other telcos it has seen significant erosion in its traditional voice business.
SureWest also started life as an incumbent carrier, serving rural areas near Sacramento, Calif. But in recent years, the company has built a strong competitive carrier business in surrounding areas, also acquiring a cable television business in the Kansas City area. Driven by strong broadband growth, SureWest saw a 3.6% rise in its revenues between first quarter of 2011 and first quarter of 2012, when revenues were $62.8 million.
Consolidated Communications also has a CLEC business, which saw a 10% increase in access line equivalents over the past year, but at 90,000 access line equivalents, it’s a considerably smaller business then the company’s ILEC business, which had 226,000 lines as of first quarter.
“This transaction with SureWest brings together our consistent cash flows with SureWest’s growth to create a financially strong company with a robust balance sheet,” said Consolidated President and CEO Bob Currey in yesterday’s announcement about the completion of the merger.
Currey also noted that the combined company “provides a diverse set of revenues and cash flows across multiple markets resulting in a stronger, more competitive company.”
“Broadband and business” has been the mantra for Tier 2 telcos like SureWest and Consolidated, who unlike Tier 1 carriers AT&T and Verizon, do not have nationwide wireless businesses they can look to for future growth. And considering that mantra, Consolidated would appear to be well positioned moving forward. The company noted at the time it announced plans to acquire SureWest that business and broadband services would represent over 70% of revenues for the combined company.
At that time, Consolidated said its plans for the merged company would include “continuing aggressive broadband penetration plans” and “exploiting video capabilities to drive average revenue per user.”
The company also said it would “expand its footprint where a payback analysis supports it” and would “selectively deploy capital for backhaul and other wholesale opportunities.”
It’s time now to see how well the merged company can execute those plans.