Consolidation of the tier 2 ILEC market, while inevitable, is really not one story, but rather a series of stories. At the center of these stories are the three main tier 2 service providers: Frontier, CenturyTel and Windstream. Finding that there is strength in numbers to fend off cable from eating even more of their service lunch, the consolidation of the tier two ILEC market got off to a strident start last fall when the former CenturyTel bid to acquire the former and much-larger EMBARQ.
Regardless of their differences in approaching broadband, video and even wireless, the new CenturyLink finally came together with a new shiny website and a 33-state service footprint that spans both rural and suburban geographies. Alternatively, Windstream's M&A strategy could be likened to a multi-course meal where it continues to dine instead of just one big meal at once.
While Windstream's CEO Jeff Gardner says other M&As will follow in 2010, the ILEC's approach has led it to purchase three smaller independent ILECs (D&E Communications, Lexcom and Iowa Telecommunications) and one CLEC (NuVox). Out of the three independent ILECs mentioned here, Connecticut-based Frontier Communications is taking perhaps the biggest leap in the tier 2 ILEC M&A strategy. Instead of taking a couple of smaller bites, or merging with another fellow tier 2, Frontier decided to purchase Verizon's sizeable rural assets, making it one of the largest ILECs. Making this purchase comes not only with the protests of consumer groups and unions afraid of another FairPoint debacle, but the ever-opportunistic cable guys who are swooping in to grab as many customers they can in the markets Frontier will serve when it finally takes over the assets.
And while speculation will continue to mount over what these players and others will do in 2010 tier 2 ILEC M&A activity, consolidation of the market is inevitable and long-overdue.
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