Consolidated's Childers: We'll grow our business service reach through acquisitions

Consolidated Communications might not be nearly the size of its larger ILEC counterparts, such as CenturyLink (NYSE: CTL) and Windstream, but the telco has adopted a similar growth strategy that includes a mix of organic growth and the acquisition of other complementary properties.

Speaking at the Morgan Stanley Leveraged Finance Conference on Wednesday, Steve Childers, CFO of Consolidated Communications, said that Consolidated's acquisition strategy will focus on evaluating assets that will help it expand its business-services reach.

"We're continuing to expand the footprint on the business side with a focus on customers that have between five and five hundred employees," Childers said. "We're really looking for where we can get the greatest return on our investment."

The telco is devoting a lot of its capex to success-based investments, and it is using an investment committee to evaluate potential business-service-related deals.

Similar to its acquisitions of SureWest and other properties, any acquisition target has to meet various criteria, including demographics and network quality.

"We're going to look at the attractiveness of the market, what are the demographics of the market, and what's our opportunity to make a difference," Childers said. "One thing that is really important to us is the quality of network, because we want to lead with broadband and video day one, and we're not interested in doing a rehab project just to get a three-megabit product."

Today, Consolidated is spending $100 million to reinvest in the business. Over 60 percent of that figure is what the company classifies as "success-based capex."

"Right now a disproportionate amount of our capex is going to consumer CPE on video," Childers said. "We'd like to see that relationship get flipped and see more of our dollars going to the commercial side of the business."

Expanding business-services investments makes sense for Consolidated.

Business services, particularly Ethernet, continue to be a growing factor for the telco. Although it does not break down specific numbers, the service provider reported that Metro Ethernet revenue rose 21 percent year-over-year in Q1 2014, for example.

One geographic market where it is seeing new growth is Texas, where it has built a 2,500-mile transport network.

In December, it announced that it was expanding its enterprise and commercial-services reach into the Dallas-Fort Worth market. These services are being supported by a 30,000-mile fiber network it built in the market, which it uses to serve its a mix of business and wholesale carrier customers.

"We touch all of the major cities in Texas, and we've talked about launching a commercial sales team in the Dallas market," Childers said. "We're excited about what we're starting to see."

Besides business services, Consolidated has also found success in the wireless-backhaul market. As of the end of the first quarter, it had signed 800 contracts to deploy its fiber to a number of large wireless operators' towers.

Childers said he sees the fiber-to-the-tower (FTTT) opportunity "continuing at a fairly strong pace in the markets that we serve."

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