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Mergers & acquisitions

Consolidated Gains Fiber, Cloud Focus With Enventis

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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