Cable Tech

WOW exploring possible sale – report

Nearly a year after selling off a chunk of its systems to fuel a fiber network buildout strategy, WideOpenWest (WOW) is reportedly exploring a more extensive sale.

WOW is exploring strategic options including a sale, Bloomberg reported Thursday, citing sources familiar with the matter. WOW shares jumped 12.42% on Thursday, closing up $2.21 to $20 per share. WOW shares were up another 3.75% in after-hours trading Thursday.

(Source: Sipa USA/Alamy Stock Photo)
(Source: Sipa USA/Alamy Stock Photo)

Colorado-based WOW declined to comment on the report. Bloomberg also sought comment from Crestview Partners, pegged as WOW's largest shareholder.

Speculation about a possible sale comes nearly a year after WOW struck two separate deals to sell off a handful of cable systems for a combined $1.8 billion. WOW sold systems in Cleveland and Columbus, Ohio, to Atlantic Broadband (now Breezeline) for $1.12 billion, and systems in Chicago; Evansville, Indiana; and Anne Arundel, Maryland, to Astound Broadband for $661 million. The remainder of WOW's systems pass about 1.88 million homes and serve about 532,000 subscribers (mostly broadband) in parts of Alabama, Florida, South Carolina, Tennessee, Michigan, Georgia, South Carolina and Tennessee.

The sales to Astound Broadband and Breezeline cut WOW's debt and put the company in a position to fund a plan to build fiber-to-the-premises (FTTP) networks to greenfield areas passing at least 200,000 homes and businesses by 2027, with the potential to expand that number to 400,000 locations. WOW has already moved ahead with that plan, with expansions targeting portions of Seminole County and Orange County, Florida.

Update: Analyst expects a sale to draw plenty of interest

At least one analyst believes a sale would make financial sense for WOW and would expect multiple suitors to make plays for WOW's remaining assets.

"[E]xploring a sale is a sensible way to maximize shareholder value with the stock continuing to trade at a considerable discount to private market value," Daniel Day, analyst with B Riley Securities, explained in a note issued Friday. He points out that, even with Thursday's rally, WOW shares trade at a sharp discount to Stonepeak Infrastructure Partners' acquisition of Astound Broadband, as well as WOW's own system sales to Astound and Atlantic Broadband/Breezeline.

"We believe a mix of strategic and financial acquirers will be interested in one or more of WOW's 14 remaining markets, and our best guess is that rather than selling the entire business to one buyer, the markets are sold in a few separate transactions (similar to last June's sale of five markets in two separate transactions) announced simultaneously," Day wrote. "Given that high-quality broadband assets are especially hot commodities, and we believe there would be no shortage of prospective suitors for WOW's markets, a sale process could move fairly quickly assuming reporting is accurate and the company is fully committed to selling the assets."

Crestview, which has a 36% stake in WOW to go with two board seats, would likely view a sale "as the cleanest way to profitably exit its position," Day added.

As for potential suitors, Day notes that WOW's larger and more mature markets, such as those in Michigan, might draw interest a private equity suitor or even Astound, while Cable One, Cox Communications and Mediacom Communications might look at WOW's Florida systems. Charter and Charter Communications "have too much overlap with WOW" to draw buying interest, the analyst believes.

Greenfield fiber focus

WOW's FTTP greenfield strategy is focused on non-adjacent areas with less competitive intensity than WOW typically sees in its legacy service areas. The operator tends to see penetration rates of about 28% in its existing markets but expects to do better in the greenfield fiber buildouts. WOW expects to spend around $1,000 for each home passed in the areas picked for greenfield fiber buildouts.

"It costs a bit more upfront [than HFC], but we feel that over time with the maintenance and some of the operational elements of it, it makes a lot of sense and it will allow us to drive a deep penetration," WOW CEO Teresa Elder said in February on the company's Q4 2021 earnings call.

B Riley's Day noted that he views WOW's greenfield expansion plan as "compelling," but acknowledged that the strategy has received a muted response from investors.

Though broadband is WOW's core focus, the company is nearing the launch of a mobile product developed in partnership with Reach Mobile. WOW will announce pricing and packaging for the product, branded as WOW! Mobile powered by Reach, closer to when it launches sometime this spring.

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— Jeff Baumgartner, Senior Editor, Light Reading

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