Light Reading
Consolidated believes the combined company can save $25 million in annual operations costs and as much as $10 million in capex

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
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Huawei Video Resource Center
Interview With Rick Talbot, Principal Analyst, Current Analysis

10|31|14   |   2:12   |   (0) comments


At the NFV Open Cloud Forum 2014, Rick Talbot shared his positive feedback about the holistic and open approach that Huawei adopts for SDN and NFV. He also found the open sharing at the event valuable as it features different perspectives from Huawei experts, telecom operators, industry analysts as well as security experts.
LRTV Huawei Video Resource Center
Interview With David Snow, Principal Analyst, Current Analysis

10|31|14   |   2:24   |   (0) comments


David Snow talked about his understanding of Huawei and its SoftCOM strategy at the NFV Open Cloud Forum 2014, saying that Huawei's wide approach combining IT and CT expertise, introducing big data and analytics into solutions and contributing to the OpenStack community particularly resonate with him and make the company stand out in the industry.
LRTV Huawei Video Resource Center
Interview With Roz Roseboro, Senior Analyst, Heavy Reading

10|31|14   |   3:13   |   (0) comments


Roz Roseboro commented on Huawei's data center capabilities and NFV solutions at the NFV Open Cloud Forum 2014, saying that in addition to covering all three key domains of compute, storage and networking, the company also emphasizes the importance of management capabilities and professional services, which are essential in making NFV a reality.
LRTV Huawei Video Resource Center
Interview With Michael Howard, Co-founder & Principal Analyst, Infonetics Research

10|31|14   |   5:25   |   (0) comments


Michael Howard talked about SDN, NFV, and OpenStack adoption at Huawei's NFV Open Cloud Forum 2014. Particularly, he pointed out that Virtual Enterprise CPE is the top NFV use case that operators plan to invest in over 2014 and 2015 to deliver new enterprise services through virtualized functions.
LRTV Huawei Video Resource Center
Interview With Jerry Caron, Senior Vice President, Current Analysis

10|31|14   |   3:11   |   (0) comments


At Huawei's NFV Open Cloud Forum 2014, Jerry Caron from Current Analysis said that orchestration and management are key to realizing SDN and NFV for global carriers, and the approach that Huawei is taking, with its FusionSphere Cloud OS at the core, is in the right direction to address the challenges.
LRTV Documentaries
Broadband Battles

10|31|14   |   01:39   |   (0) comments


This year's Broadband World Forum featured a number of show floor battles focused on access gear, components and coffee.
Jonestown
Mobile Backhaul: Going to the Dark Side?

10|30|14   |   2:26   |   (1) comment


Heavy Reading's Patrick Donegan shares his view on a dark trend that bubbled up at Light Reading's annual backhaul conference in NYC.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With CEO of SwitchCom

10|30|14   |   4:13   |   (0) comments


SwitchCom, an IT company based in Angola, recommends a variety of Huawei solutions and hardware to their customers in the energy industry.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With Ethiopia's Ministry of Water Irrigation & Energy

10|30|14   |   4:08   |   (0) comments


Gosaye Mengistie of Ethiopia's Ministry of Water Irrigation & Energy discusses the collaboration with Huawei in that country.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview with Dongfang Electronics Corporation

10|30|14   |   5:46   |   (0) comments


Dongfang Electronics Corporation, headquartered in Chengdu, China, is one of China's largest manufacturers of power generators and contractors of power station projects.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview with Zimbabwe's Customers

10|30|14   |   3:31   |   (0) comments


Representatives of Zimbabwe's Ministry of Power and Development discuss the energy needs of their country as well as new areas of improvement due to enhanced ICT capabilities.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With Colbún Chile

10|30|14   |   4:29   |   (0) comments


In Chile, an aging energy infrastructure was in dire need of a modern update. Claudio Valenzuela of Colbún discusses how Huawei's ICT solutions continue to provide crucial information to improve the grid and how an in-country engineer is a cricial asset.
Upcoming Live Events
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
May 6, 2015, McCormick Convention Center, Chicago, IL
May 30, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
WhoIsHostingThis.com presents six of the world's most extreme WiFi hotspots, enabling the most epic selfies you can imagine.
Hot Topics
Microsoft's Skype Embraces WebRTC on IE
Sarah Reedy, Senior Editor, 10/27/2014
FTC Slaps AT&T With Throttling Lawsuit
Sarah Reedy, Senior Editor, 10/28/2014
Wheeler Gets Down With OTT
Mari Silbey, Independent Technology Editor, 10/29/2014
China's MVNOs Hit the Wall
Robert Clark, 10/27/2014
Let's Not Kill SDN & NFV With Silos
Francois Locoh-Donou, Senior VP, Global Products Group, Ciena, 10/28/2014
Like Us on Facebook
Twitter Feed