Knology Plucks Sunflower

2:20 PM -- Knology Inc. (Nasdaq: KNOL)'s used its second-quarter earnings announcement to confirm an earlier report speculating that the competitive cable overbuilder was closing in on a deal to buy Sunflower Broadband , an operator based in Lawrence, Kan.

Knology revealed today that it has signed a definitive $165 million deal for Sunflower, which is expected to generate roughly $51 million in revenues for calendar year 2010. Knology noted that it will fund the deal with a combo of cash on hand and what it can grab from the capital markets. (See Knology Buying Sunflower Broadband.)

Knology's been coupling small acquisitions with an organic fill-in/edge-out strategy that calls for it to extend its cable networks beyond its traditional franchise area borders. As Knology's organic growth strategy goes, company president and CEO Rodger Johnson said on today's earnings call that the operator has 31 fill-in and edge-out projects currently underway. (See Knology Goes on the Offensive , Knology Bumps Into Charter , Knology Posts Q3, Buys Small MSO, and Knology Gets PrairieWave.)

The purchase of Sunflower will add about 54,000 homes to Knology's current footprint, which serves nearly 700,000 video, voice, and data connections in parts of Florida, South Dakota, Georgia, South Carolina, Alabama, and Tennessee.

In Sunflower, Knology is getting a Tier 2 operator that's been known for cable innovation, being among the first to test out dynamic ad insertion, resell wireless services, and roll out Docsis 3.0 services. In 2005, Sunflower even tested out a voice-activated TV navigation system that required a special set-top sidecar and a remote outfitted with a push-to-talk button. (See Sunflower Unleashes Docsis 3.0.)

Knology, typically viewed as the scrappy overbuilder, will now be positioned as the incumbent in Douglas County and Lawrence, where it will do battle with Sunflower's primary wireline nemesis, AT&T Inc. (NYSE: T).

And Knology has been doing some upgrading of its own. Johnson said Knology now has expanded Docsis 3.0 into six markets. Knology will have D3 wired up in about 65 percent of its footprint by year's end, he said. (See Knology Expands D3 Footprint.)

— Jeff Baumgartner, Site Editor, Light Reading Cable

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