Consolidated wraps FairPoint acquisition, becomes ninth largest domestic U.S. fiber provider

iStockPhoto.com
The newly combined company will continue to be headquartered in Mattoon, Illinois, and Consolidated CEO Bob Udell will continue to serve in his current role.

Consolidated Communications has completed its acquisition of FairPoint Communications, advancing its standing as the nation’s ninth largest fiber provider with a presence in 24 states.

Bob Udell, president and CEO of Consolidated Communications, said in a release that it can better address the larger customer base with a greater set of solutions.

Udell Consolidated
Bob Udell

"We know our customers' needs are changing and this business combination creates a stronger company with greater scale and resources to serve our customers,” Udell said. “We are excited to close on the acquisition and look forward to realizing the many benefits of this merger and leveraging our combined team's expertise."

By completing the purchase, Consolidated adds over 22,000 route miles to its fiber network without any overlapping markets. The service provider’s fiber network will now span over 36,000 route miles.

Besides scaling the overall fiber route mile count, Consolidated also grows its on-net fiber building count to 8,800 and fiber-connected towers total to 2,600.

As of the end of the first quarter, FairPoint had 3,000 on-net fiber buildings and has connected its fiber to over 1,300 towers via contracts with wireless carriers since it entered the market in 2011.

RELATED: Consolidated's FairPoint acquisition gets Vermont regulatory approval, sets new consumer, business service plans

Having a larger number of on-net buildings and wireless towers connected to its network means Consolidated has more opportunities to pursue more dark fiber and lit Ethernet service opportunities with a larger mix of business and wholesale customers. While fiber into business buildings is still far from ubiquitous, the gap of buildings without fiber continues to shrink. According to Vertical Systems Group, business fiber penetration in commercial buildings grew to 49.6% in 2016. This is remarkable when one considers that the fiber gap “has progressively dropped to 50.4% in 2016, down from nearly 90% in 2004.”

In tandem with a larger fiber network, Consolidated will have a larger product and service portfolio. As part of integrating the two companies, Consolidated plans to expand its cloud services product suite to FairPoint markets, as well as make other broadband enhancements, such as pledging $52.2 million to conduct network upgrades in Maine as part of an agreement it made with the state’s public advocate.

Similarly, in New Hampshire, Consolidated will be required to make capital expenditures on the network valued at 13% of in-state revenues per year for the years 2018, 2019 and 2020.

From a financial synergy perspective, Consolidated expects the acquisition to generate annual run rate cost savings of approximately $55 million, which are expected to be achieved within two years after completion of the merger.

Udell will continue to serve as CEO of the combined company, and Steve Childers will serve as CFO. As part of the merger agreement, Consolidated has appointed Wayne Wilson, a New Hampshire resident who previously served on the FairPoint board, to the Consolidated Communications Board at closing. The combined company will continue to be headquartered in Mattoon, Illinois, and senior executives will be based throughout its newly expanded service area.

Consolidated Communications will report second-quarter 2017 earnings on August 3, 2017. The company will discuss results and other developments for the combined company during the call and will update its annual guidance.