Consolidated Communications secured a key approval for a multi-million investment deal it struck with Searchlight Capital Partners last year, as the U.S. Federal Communications Commission (FCC) signed off on the transaction.
Originally announced in September 2020, the two-stage deal comprised an initial investment of $350 million in exchange for 8% of the company’s stock and a secondary infusion of $75 million in exchange for an additional 10.1% of its stock. The pair completed phase one of the transaction in October 2020, but required approvals from various state Public Utilities Commissions, the Department of Justice (DoJ) and the FCC to proceed with the second phase.
Consolidated said in July it had received the necessary state and DoJ permissions, leaving FCC consent the only outstanding approval. The FCC was required to weigh in because the deal would transfer more than 25% ownership of the company to a foreign entity. Specifically, the agency noted that following phase two of the deal, Searchlight would own “34.55% of Consolidated’s common voting stock and all of the non-voting Preferred Stock, which together would represent approximately 49.21% of the company’s total equity.”
The FCC granted approval for the deal in a public notice, concluding it would “serve the public interest, convenience and necessity.” However, the regulator conditioned the deal on terms laid out in a Letter of Agreement Consolidated signed with the DoJ.
Under these terms, Consolidated must designate a U.S. law enforcement contact who will have access to its records; appoint and maintain a security officer with a U.S. government security clearance to address any security concerns identified; prepare a cybersecurity plan and a system security plan following guidelines laid out by the National Institute of Standards and Technology; comply with lawful interception statutes; provide notice of any security breaches within 48 hours of their discovery; submit a list of what network equipment it uses for approval; and provide notice of any changes to its business model, corporate structure or service offerings within 30 days.
Consolidated has said the Searchlight investment will help it slash its net debt by $325 million and fuel its fiber expansion plan. The operator is aiming to cover 1.6 million locations or 70% of its footprint with fiber by 2025. It recently launched a new “Fidium Fiber” brand for consumers in its New England coverage area as part of the rollout.