Consolidated uses M&A to further fiber network footprint, respond to business, wholesale opportunities

Consolidated Communications isn't afraid to make a deal to purchase another company, especially if that service provider can help it bolster its network footprint.

Steve Childers, CFO of Consolidated, told investors during the recent Jefferies Communications Conference that it is looking at deals that will it can quickly integrate, particularly those that have fiber assets.

Earlier this year, Consolidated purchased CTC Communications, a Champaign-Urbana, Ill., area telephone company (CTC) and its sister company, Big Broadband Services, a private business communications provider, for $13 million, deepening its fiber and on-net fiber building reach.

"The CTC deal is a great transaction and fits the definition of what we always talk about as a bolt-on acquisition in our existing footprint," Childers said. "It's 45 minutes from our headquarters in Matoon, Illinois, which came with strong fiber assets that's commercially focused."

Similar to its acquisition of Hickory Tech in 2014, the CTC deal may be smaller, but it's part of Consolidated's focus to be a larger player in the competitive business services and wholesale services market.

Adding more fiber to its business footprint also means it could extend facilities to nearby tower and potentially small cell opportunities.

By making the CTC deal, Consolidated gained 45 miles of fiber in Champaign and strong relationships with businesses in various verticals, including education, retail and financial. It also gained 275 miles of fiber and 300 lit buildings, two elements that will be key to responding to future business opportunities.

"We think we can expand the footprint there," Childers said. "They went through a transition in recent years and there is some growth there."

Due to strong Ethernet and cloud services sales, Consolidated's first quarter total commercial and carrier revenues were $76.6 million. Within the segment, data and transport service revenue was $49.1 million, up year-over-year from $46.1 million in the same period a year ago. 

Childers said the company sees more opportunities to consolidate the Tier 2 and Tier 3 telco markets.

"Looking at it from a Consolidated perspective, we were built on doing multiple acquisitions," Childers said. "We have a reputation for being pretty disciplined in integrating properties really quickly and extracting synergies."

Besides small deals like CTC, Consolidated is looking at the potential to do larger deals to establish a presence in states it does not operate in today.

"We're looking at both tuck ins like Champaign, which would be contiguous in operation or going into another state," Childers said. "We'll evaluate the quality of the assets and how quickly we can launch broadband services and we do see future consolidation."

For more:
- hear the Jefferies webcast (reg req.)

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