Telephone and Data Systems (NYSE: TDS) President and CEO LeRoy Carlson told investors this week that he is satisfied with its purchase of regional cable operator Baja Broadband and he foresees similar deals could happen in the future.
"We would like to buy more assets like Baja or other attractive cable assets," Carlson said during the Stifel 2014 Technology, Internet & Media Conference. "What we're looking for [are] good demographics and areas where we're not competing head on with FiOS because it is a very competitive fiber to the home offering."
In addition to demographics, any deal has to be at the right price.
His comments about new cable acquisitions come as Charter Communications (Nasdaq: CHTR) has launched a hostile takeover effort of Time Warner Cable (NYSE: TWC).
Carlson said that if Charter is successful in purchasing Time Warner Cable, it is possible TDS could purchase regional assets that the proposed new company would have to shed to make such a deal happen.
"If Charter were to be successful in buying Time Warner Cable, whether there might be some properties that would become available for a company like us, we'd be delighted if there were," Carlson said. "Certainly if that goes through we would be talking to all parties we could talk to about those kinds of opportunities."
One of the key elements of the Baja purchase that helped TDS is increasing its broadband subscriber base.
When TDS purchased Baja last February, it gained 74,000 video subscribers, 56,000 high-speed broadband subscribers and 15,000 digital voice subscribers in Colorado, New Mexico, Texas and Utah. Baja generated annual revenues of $82.4 million in 2012 and had about 285 employees.
"We're delighted with how Baja has been playing out for us," Carlson said. "It has been fully integrated into TDS Telecom and what we have experienced is higher growth rates for the broadband customer base, which is very high margin revenue."
Carlson added that it is addressing its video losses by consolidating head ends to give customers more channels.
Besides giving it a greater foothold in the video and broadband market, the Baja deal creates another target TDS Telecom could use to deliver business services.
The telco can leverage Baja's already built out DOCSIS and fiber-based network infrastructure to bring its managedIP services set to a set of underserved businesses that probably can't get access to these services.
Among some of the business services it has begun to offer are its security products PC Defender and online backup.
"We'll be rolling out more business products which we had at TDS Telecom in the Baja territory later this year, so there's a lot of synergy," Carlson said. "Really they are evolving into broadband companies and we're enthusiastic about adding to it."
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