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Consolidated spends $350 million to expand its network reach and give the combined carrier more business services savvy.

Consolidated Gains Fiber, Cloud Focus With Enventis

Jason Meyers
6/30/2014
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Consolidated Communications continued to live up to its name Monday when it announced it would acquire Enventis for $350 million, expanding its fiber network footprint and potentially strengthening its focus on business customers.

Consolidated Communications Inc. acquired SureWest Communications in early 2012, adding Kansas City and Sacramento to its territory. Now the Illinois company is folding in Enventis (NASDAQ: ENVE) of Mankato, Minn., which has a 4,200-mile fiber network that spans Minnesota and portions of Iowa, North Dakota, South Dakota, and Wisconsin. (See Consolidated, Enventis to Merge.)

Just last week, Enventis rolled out several enterprise-focused cloud services aimed at the small and midsized business market, which is also an area of focus for Consolidated. To date, Consolidated has offered cloud-based services only through partners on a market-by-market basis, but Bob Udell, the company's president and chief operating officer, says it sees cloud offerings as a way to be more competitive in the business sector. (See Enventis Strengthens Its Cloud Position.)

"This gives us a more nicely packaged way to consider that," Udell says. The service provider believes the network of Consolidated and Enventis will be the strongest asset of the combined company. "There are some great fiber assets there, in addition to their experience in the equipment and data segment."

The expansion into cloud services could give Enventis (and now Consolidated) a stronger business focus. However, this is a hotly competitive market -- and the smaller businesses in the combined company's territories are not necessarily ready for it.

"Cloud services are more important in a multi-location world than they are to smaller businesses, and they can't really serve those companies on a nationwide basis," says Craig Clausen, executive vice president and principal analyst of New Paradigm Resources Group Inc. "What's the difference between a small business and residential users? It's more profitable, but it doesn't get you to those grand levels you need to be to achieve economies of scale and add value-added services."

The expanded fiber footprint Consolidated gains, along with employees with more experience serving the business sector, are the most interesting aspects of the merger, Clausen says.

"It's a market expansion -- though I can't say that expanding into Minnesota, northern Iowa, and part of the Dakotas is really where the money is," he says. "But it does bring together a lot of assets and give them more strength. And depending on the people who come with the deal, that could be where the real value lies."

Jason Meyers, Utility Communications Editor, Light Reading

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MikeP688
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MikeP688,
User Rank: Light Sabre
6/30/2014 | 11:41:44 PM
Re: Small businesses and the cloud
Any SMB (or start-up) needs an edge.   It seems from having see what they've done, they are indeed able to provide SMB's the edge especially as the "revolution" continues which we've been deliberating throughout the month.  I would be curious, though, to see how they would stack up against say" Amazon" with the free services it provides for start-ups.    
Carol Wilson
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Carol Wilson,
User Rank: Blogger
6/30/2014 | 3:48:44 PM
Small businesses and the cloud
I'm not sure I agree with Craig on small businesses not being ready for cloud services. There is significant thinking in the cloud world that small businesses want the same IT services and sophistication as larger companies if they can get it without capex and staffing investments and cloud services represent one option for doing that. A year ago, a Forrester survey showed more than half of SMBs were already using cloud services in some way. 

This is a market that Enventis knows well and could help Consolidated address. 

If you look at Consolidated's acquisitions -first SureWest and now Enventis - these are companies that have done some pioneering of advanced services in smaller markets. As Craig notes, if Consolidated retains that expertise, there could be significant benefits for the company and the areas it serves. 
jasonmeyers
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jasonmeyers,
User Rank: Blogger
6/30/2014 | 3:29:35 PM
What's next
It will be interesting to see where Consolidated goes next, both geographically and strategically -- whether it will extend the cloud focus Enventis started throughout the combined network, extend more of its fiber network to homes and businesses to combat Google and potential competition from municipal and utility networks in certain markets, or maybe all of the above.  
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