Light Reading

Consolidated to Buy SureWest for $340.9M

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
2/6/2012
50%
50%

Consolidated Communications Inc. has struck a deal to acquire SureWest Communications (Nasdaq: SURW) for US$340.9 million in cash and stock, marking a deal that combines two of the nation's Tier 2 service providers. (See Consolidated Snaps Up SureWest.)

Consolidated has agreed to pay $23 per share, a 47 percent premium to SureWest's stock price ($15.59) as of the close on Feb. 3. In conjunction, Morgan Stanley Senior Funding is providing Consolidated with $350 million of committed debt financing, which will be used to refinance SureWest's debt and pay for the cash portion of the purchase price.

Consolidated is looking to acquire SureWest's mix of copper, fiber and hybrid fiber/coax (HFC) systems in the Sacremento, Calif., and Kansas City regions that serve more than 321,700 residential "marketable homes" and 15,700 business customers. SureWest posted third-quarter net income of $643,000, down from $1.4 million year-on-year, on revenues of $63 million, up 3 percent.

Consolidated pipes voice, data and video services primarily to rural pockets of Illinois, Pennsylvania and Texas. It ended the third quarter with 446,426 total "connections," including 109,572 DSL subs and 32,981 IPTV customers.

Consolidated said the combined company would have generated about $620 million in revenues for the fiscal year ended Sep. 30, 2011. It estimates that Consolidated and SureWest, an IPTV pioneer, together will have about 1,775 employees.

Why this matters
The merger won't let Consolidated create larger geographic clusters, but it should help the company achieve greater scale and efficiency for its video and broadband services. Consolidated believes the merger will create $25 million in annual operational savings, and yearly capex savings in the range of $5 million to $10 million by the end of the first year after the deal closes. In the meantime, Consolidated expects to incur merger and integration costs of $20 million to $25 million over the first two years after the deal is sealed.

Monday's merger could signal a new era of consolidation among Tier 2 service providers that are looking to generate more scale amid rising fees for video programming.

For more
Check out some recent headlines about SureWest and Consolidated Communications.



— Jeff Baumgartner, Site Editor, Light Reading Cable



(5)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Jeff Baumgartner
50%
50%
Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 5:43:29 PM
re: Consolidated to Buy SureWest for $340.9M

Nothing earth-shattering from the follow up call, but here are some tidbits from it:

-          Consolidated Communications CEO Bob Curry said his company intends to expand its national footprint by looking at other M&A opportunities, "hopefully somewhere near where we already operate."

-          The IPTV middleware situation will stay as-is for the time being. SureWest's been using Microsoft Mediaroom and Consolidated's been with Myrio.  Consolidated execs said it's too early to say if they'll unify one or the other, though they said Surewest's been happy with Mediaroom  so far and that Consolidated has been making some progress with its middleware vendor.

-          They hope to close the deal by third or fourth quarter of 2012.

Jeff Baumgartner
50%
50%
Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 5:43:29 PM
re: Consolidated to Buy SureWest for $340.9M


Just a coincidence, but they are announcing this deal just as Google starts to lay fiber in the KC area, though the Consolidated guys think this could represent an opportunity rather than a new competitor since they might be able to sell services on Google's fiber. JB

paolo.franzoi
50%
50%
paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 5:43:28 PM
re: Consolidated to Buy SureWest for $340.9M


 


I was thinking about who they might go after next.  Maybe TDS?  There are not that many carriers with 100K+ lines.  Lots of the IOCs are tiny and a rollup would take lots of time and transactions.  Maybe they could buy some properties from Fairpoint?


seven


 

Jeff Baumgartner
50%
50%
Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 5:43:26 PM
re: Consolidated to Buy SureWest for $340.9M


The premium Consolidated agreed to pay pretty much evaporated in SureWest's stock price Monday, closing at $22.67, up $7.08 or 45.41%.  Consolidated shares were down 27 cents (1.40%) to $18.98. JB


 


 

Jeff Baumgartner
50%
50%
Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 5:43:26 PM
re: Consolidated to Buy SureWest for $340.9M


Perhaps they can be choosy here and only target IOCs that are relatively adjacent since there aren't many bigger targets out there that would also be somewhat adjacent to the Surewest/Consolidated properties. JB


 

Flash Poll
From The Founder
The New IP is actually bigger even than business. Like another hugely important tech that Light Reading is digging into right now, the New IP has the potential to change the world by fundamentally advancing what it is possible for people to achieve with communications.
LRTV Interviews
In the Cloud With Telecom Italia

3|5|15   |   7:10   |   (0) comments


Light Reading CEO Steve Saunders sits down with Telecom Italia's Simone Battiferri at Mobile World Congress to discuss virtualization, agility and the economic advantages of the cloud.
LRTV Huawei Video Resource Center
New Ways of Working

3|5|15   |   4:24   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Hong Kong Telecom's Michael Yue explains how the transformation in its business has changed its customer relationships.
LRTV Huawei Video Resource Center
Bridging the Digital Gap

3|5|15   |   4:03   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Boingo's Dr. Derek Peterson explains how ICT can help telcos bring the physical and virtual worlds closer together.
LRTV Huawei Video Resource Center
Making the Internet of Things Affordable

3|5|15   |   2:42   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Telefonica's Dr. Mike Short explains how the Internet of Things demands a new low-cost approach to connectivity from telcos.
LRTV Huawei Video Resource Center
Evolution, Not Revolution

3|5|15   |   2:00   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Heavy Reading's Patrick Donegan explains why telcos can't be too hasty in their efforts to transform themselves.
LRTV Custom TV
Management & Orchestration Enablement Strategies Required for NFV Commercial Success

3|5|15   |   6:22   |   (0) comments


NFV commercial success rests on successful service orchestration strategies which can span heterogeneous physical, virtual, legacy and next-gen networks. Network data and security integrity are additional key aspects. Nakina provides a suite of orchestratable network integrity applications built on an open, scalable MANO enablement platform.
LRTV Huawei Video Resource Center
The Power of Five Convergences in OceanStor OS

3|4|15   |   6:24   |   (0) comments


OceanStor OS is Huawei's brand-new storage operating system. While inheriting the consistent high stability, reliability and performance from the company's previous storage products, OceanStor OS abounds in new converged storage features. Specifically, the new storage operating system achieves "five convergences" to lift storage convergence to a higher level.
LRTV Huawei Video Resource Center
4K Brings Extreme Video Experience

3|4|15   |   8:10   |   (0) comments


4K video is a hot topic in the video industry. It will certainly bring an extreme video experience to end users. At the same time, however, it will also pose a big challenge to operators. Check out this Huawei 4K experts' discussion about how operators can achieve success in 4K video service.
LRTV Interviews
DT's Virtualization Vision for Europe

3|4|15   |   10:23   |   (0) comments


Light Reading CEO Steve Saunders talks virtualization, cloudification and standards with Deutsche Telekom's Axel Clauberg at Mobile World Congress.
LRTV Custom TV
ZTE's Wireline at MWC 2015

3|4|15   |   6:35   |   (0) comments


Light Reading speaks with Jane Chen, ZTE's Senior VP of Wireline Business, about innovations in her product line at Mobile World Congress.
LRTV Custom TV
ZTE at MWC 2015

3|4|15   |   4:24   |   (0) comments


Dr. Dick Chen of ZTE USA gives Light Reading an overview of what's new at ZTE's pavilion at Mobile World Congress 2015.
LRTV Interviews
Ericsson CEO Talks Telco Data Center Tech

3|4|15   |   05:45   |   (1) comment


At Mobile World Congress, Ericsson CEO Hans Vestberg discusses telco data center technology, business models, small cells and more.
Upcoming Live Events
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
All Upcoming Live Events
Infographics
Net neutrality, broadband services and the current outlook on data consumption, as presented by the New Jersey Institute of Technology.
Hot Topics
Internet Pioneers Decry Title II Rules
Carol Wilson, Editor-at-large, 3/2/2015
Wheeler: We'll Enforce Title II 'Case-By-Case'
Sarah Thomas, Editorial Operations Director, 3/3/2015
New CenturyLink CTO in Major Overhaul
Carol Wilson, Editor-at-large, 3/4/2015
Verizon Takes Radio Dot to Detroit, VoLTE Overseas
Sarah Thomas, Editorial Operations Director, 2/27/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders talks transformation and virtualization – including Light Reading's independent testing of the vendor's virtualization solutions – with Cisco CEO John Chambers at Mobile World Congress in Barcelona.
Check out Light Reading's interview with Jay Samit, the newly appointed CEO of publicly traded SeaChange International Inc. With a resume that includes Sony, EMI, and Universal, Samit brings a reputation as an entrepreneur and a disruptor to his new role at the video solutions company. Hear what he had to say about the opportunities in video, as well as the outlook for cable, telco, OTT and mobile service providers.