Consolidation Won't Save Small Telcos
There was a point at which larger telcos were snapping up smaller, rural companies -- Telephone & Data Systems Inc. (Amex: TDS), CenturyLink Inc. (NYSE: CTL) (back in the Century Tel days), Windstream Communications Inc. (Nasdaq: WIN) and Frontier Communications Corp. (NYSE: FTR), in particular, were actively expanding their footprint.
That trend has definitely slowed. It's not that these companies don't have money to spend or aren't spending it -- they just aren't spending it on rural expansion.
Both CenturyLink and Frontier are still absorbing what they've already bought -- Qwest Communications and a chunk of Verizon's rural territory, respectively. Windstream has shifted to acquiring CLECs that deliver business services rather than expanding its residential footprint. CenturyLink and Windstream also acquired IT and cloud expertise to build a portfolio of cloud offers. (See Windstream Completes Paetec Buy, Windstream Hosted Solutions Lands PMMC, CenturyLink Brings Savvis Cloud to SMBs and Savvis/CenturyLink Set for July 15.)
TDS is still on a buying binge, but it's now buying IT expertise, not rural telcos. The TDS focus is on adding services on top of its broadband pipes and improving those pipes across the footprint it already owns. (See TDS Buying IT Expertise, Not Burying It .)
This is not good news for the rural guys, some of whom would like nothing better than to sell their companies and avoid the heartburn of trying to survive the latest round of regulatory changes and uncertainty.
It should be a signal to the folks at the FCC, however. If anyone in Washington is expecting industry-led consolidation of smaller telcos to address perceived inefficiencies in rural telco operations, they are going to be disappointed. That is not the direction in which the market is moving, in fact, quite the opposite.
Both Jeff Gardner, CEO of Windstream, and Dave Wittwer, CEO of TDS Telecom , will be joining us next October at TelcoTV, to discuss their strategies, if you'd like to join us and hear them out.
— Carol Wilson, Chief Editor, Events, Light Reading