Google's (Nasdaq: GOOG) main broadband rival in Kansas City, Kan., SureWest (Nasdaq: SURW) might be its biggest savior to enhance its Fiber to the Home (FTTH) deployment plans.
According to a research note issued by Drexel Hamilton, acquiring SureWest is one option Google could consider to quickly expand their FTTH footprint.
SureWest's latest FTTH target has been in nearby Olathe, Kan., an area where it allocated additional capital in 2011 to add 5,000 new homes. In late 2007, it entered the Kansas City, Mo. market through its purchase of the former Everest Broadband.
Barry M. Sine, managing director of equity research at Drexel Hamilton, said a relationship with Google might provide some upside for SureWest.
"We see two potential positives for SureWest," he wrote. "It could either be acquired by Google, as Google did with Motorola Mobility (NYSE: MMI), or it could become a tenant on Google's network using it as an inexpensive way to significantly expand its footprint."
Regardless of what the outcome may be, Wall Street liked the news and sent up SureWest's shares 6.8 percent to $14.60 in early trading on Monday.
News of a potential marriage between the ILEC and the Internet giant come on the heels of problems Google has had in securing access to utility poles in Kansas City. Google has been unable to reach an agreement with city officials on where it can place its fiber cables and how much it will have to pay. Such a delay is a major setback for the Internet giant. Originally, Google hoped to start signing up customers in Q4 2011 and offer services in Q1 2012, but this latest delay has obviously set back those goals.
Sine wrote that "Google has made its public policy statement in announcing this network, but could suffer a black eye if it encounters further delays and problems..."
For more:
- see this Street Insider report
- here's FierceIPTV's take
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