Consolidated Communications is selling off its Virginia wireline properties—Peoples Mutual Telephone Company and Peoples Mutual Long Distance Company—to RiverStreet Networks, a subsidiary of Wilkes Communications, for $21 million in cash.
In fiscal 2016, Consolidated’s Virginia operations contributed about $6.5 million of revenue. The closing is subject to customary regulatory approvals, which are expected to be completed in the first quarter of 2018.
Peoples operates as a local exchange carrier in Virginia to the communities of Gretna, Hurt, Renan and Sandy Level, providing telecom services to residents and businesses.
Like the earlier sale it made of its Iowa Heartland properties in 2016, this divestiture enables Consolidated to hone its focus on its core regions and on the integration of FairPoint Communications. The Heartland properties, which were primarily copper-based assets, contributed approximately $7 million of revenue in fiscal 2015.
Similarly, the Virginia assets which Consolidated got from its acquisition of FairPoint were not strategic with only a small amount of fiber.
Jennifer Fritzsche, senior analyst for Wells Fargo, wrote in a research note that this is a “positive move” for Consolidated particularly as the company pivots its M&A strategy on fiber-centric assets.
“As we have written in the past, more of the company's strategy is toward fiber centric assets,” Fritzsche said. “The fact it is purposely choosing to divest these assets without much fiber offers further evidence of this strategic direction. While we believe further de-leveraging would be seen as a positive, we continue to believe there is low hanging fruit to push fiber deeper in the core FairPoint markets (Northeast corridor) and pull from the fiber core in place in that market.”
FairPoint, one of the biggest acquisitions it has made in its recent history, is just one of several the telco has conducted to bolster its fiber asset mix. Earlier, the service provider acquired CTC Communications and Enventis—two deals that gave Consolidated a greater mix of metro and on-net building fiber.