Consolidated's Childers: Our future M&A activity will focus on regional fiber providers, cable assets

Consolidated Communications may still be into its two-year integration of Enventis, but the service provider is not going to rule out other deals if they could provide complementary footprint or reach that would enhance its business and wholesale service capabilities.

Speaking during the Morgan Stanley Leveraged Finance Conference, Steve Childers, CFO of Consolidated Communications, told investors that a near-term focus could be on acquiring regional fiber assets or even smaller cable operations, all of which would not delay the integration of Enventis.

"If we were doing a large operating company that might be a concern, but we're looking at regional fiber assets, maybe a cable overlay or some operating company-type stuff," Childers said. "I don't think it would delay us if we found the right opportunity, but it would be a consideration."

Perhaps not surprisingly, a key focus for Consolidated would be on acquiring fiber-based assets, particularly those that would give it more power to target more business and wholesale opportunities in its footprint.

Fiber expansion has been an ongoing priority for the telco. Over the past year, Consolidated expanded its fiber network miles by over 5 percent to 13,038, and grew on-net buildings by 3 percent to more than 4,800. This expansion was carried out through its own internal expansions and its acquisition of Enventis.

Evidence of its success in these segments was on display during the first quarter.

While consumer revenues remained flat at $69.3 million year over year, business and commercial services continue to rise. Due to strong Metro Ethernet and VoIP solutions sales, Consolidated's business service revenues rose year-over-year to $73.7 million, up 3.7 percent year-over-year.

"We show 3.7 percent growth in business and carrier sales today and we expect that to be in that kind of area going forward," Childers said. "Of the success-based projects we have won we will see the benefits of in the third and fourth quarter and demonstrate that growth is sustainable over time."

Despite seeing growth in the business and wholesale segment, Consolidated is not just blindly building fiber assets everywhere, but rather pursuing opportunities with a success based model.

"For us to do a build for the commercial or carrier side it has to have a 25 percent internal rate of return and a better than a 36-month payback," Childers said. "If it does not meet those criteria for key strategic reasons, we might make an exception but we have not so far."

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