UPDATED: Ritter Communications extends into west Tennessee with Millington Telephone, Cable acquisitions

Ritter Communications on Tuesday reached an agreement to acquire west Tennessee-based Millington Telephone Company and Millington CATV.

By making these deals, Ritter immediately extends its service footprint into the western Tennessee market with a new set of cable TV and traditional wireline telephone network assets.

As a traditional telco, Millington Telephone Company offers a mix of POTS voice and broadband data services for residential and business customers in four counties in Tennessee, including Tipton County, which the telco said is one of the state's fastest growing areas.

Like Ritter, Millington found its way into the cable TV industry in the early 1980s. Over its cable network, it offers cable-based video and broadband services in north Shelby County and south Tipton County.

When it completes the acquisition, Ritter, which currently serves 25,000 residential and business customers in over 45 Arkansas communities, will gain an additional 20,000 business and residential customers in parts of Shelby, Tipton, Haywood and Fayette counties in Tennessee.

Ritter and Millington are hardly strangers as the two service providers have been sharing a fiber optic link that extends across the Mississippi River. This route enabled Ritter to better serve a number of wholesale opportunities, while giving Millington a middle mile path for its Internet traffic.

Dan Hatzenbuehler, chairman and CEO of Ritter, told FierceTelecom that because they already had the fiber partnership in place, it was a logical way to expand geographically into Tennessee.

"When it came on the market as possibly being for sale it really fit into our core strategies of wanting to and needing to expand our geographic footprint [not only] in businesses we already knew, but also enter a market and have the telephone company and the cable company," he said. "By being able to acquire both that enabled us to expand services farther over the copper network or the cable TV network."

Because they can connect Millington's assets to its own via the fiber link they already shared, Ritter can extend higher speed DOCSIS-based HFC and copper-based DSL services to both residential and its growing business customer base.

"With that infrastructure already in place and our ability to connect to our network and the capabilities that we already developed in northeast Arkansas, it's a relatively easy extension of those products and services over into west Tennessee," Hatzenbuehler said.

Although neither company would reveal the terms of the deal, Ritter said that once it gets the expected regulatory approvals and satisfies other customary conditions, it expects to close the two acquisitions by the end of this year.

Consolidation of the independent ILEC market and regional cable market over the past three years has been fierce, and Ritter has not been shy about acquiring other local providers to expand its service and geographic footprint, particularly on the cable front.

Following its acquisition of cable systems in a number of northeast and north central Arkansas communities from Cebridge Connections, now Suddenlink Communications, in 2005, Ritter bought Blytheville, Ark.-based CableTel in 2008 and then the retail division of Jonesboro, Ark.-based Optus in 2010.

From an industrywide perspective, Ritter's acquisition of Millington's assets comes at a time when smaller telcos are struggling to survive by creating new revenue streams besides traditional POTS service.

"The Millington acquisitions were part of a five-year strategic plan we have in place to grow our communications operations all of which started with the growing realization that came a number of years ago that rural telecommunications firms are experiencing greater pressures on regulated revenues and in order to grow we need to find ways to effectively move into deregulated operations to expand their revenue streams," said Hatzenbuehler. "That plus the fact that cable TV systems were starting to offer digital voice services there was a defensive tone to our strategy to go out and acquire cable TV properties in our LEC territories."

Complementing its acquisition efforts, Ritter has been no less aggressive in expanding its own network to target the needs of business customers that want Ethernet and cloud-based services. The service provider said it recently completed a "major fiber overbuild serving the main business and industry corridors in Jonesboro."

Ritter's fiber network extension is part of a broader five-year strategy to become a facilities-based CLEC in the Jonesboro, Ark. market, a major business hub in Northeast Arkansas. It does not offer residential services, which are currently served by AT&T (NYSE: T) and Suddenlink, in that market.

Initially offering POTS voice and later Internet services to businesses in Jonesboro by renting facilities from AT&T, Ritter has over time switched over these customers to its own growing fiber network, selling a set of higher speed data services like Ethernet. Much of the early demand for fiber-based services was from medical facilities affiliated with St. Bernard's regional medical center.

"We started to extending fiber to enable some of our customers to fiber some of their businesses together and as we started to extend fiber to meet existing client's needs that gave us opportunities to serve other clients along that fiber route," said Hatzenbuehler. "About three years ago, we presented to our board a plan to build a fiber system through the major business corridors in Jonesboro."

After completing the fiber extension into Jonesboro last year, the service provider has been not only moving some of its existing customers that were on the leased facilities onto its network, but also signing up new business customers. Over this fiber network, Ritter can deliver a mix of 100 Mbps Ethernet speeds to business customers and 30-50 Mbps on its cable network to residential customers.

Going forward, Hatzenbuehler said that they plan to replicate a similar fiber-based service strategy in the Millington markets and other possible markets it may enter through yet-to-be-announced acquisitions.

While retail business and consumer services are clearly the near-term focus for Ritter, the service provider is also keen to leverage that fiber to chase new wholesale opportunities like Fiber to the Tower (FTTT) via its newly-created transport division.

Albeit still in the development stage, Ritter plans to attack the wholesale opportunity via its own fiber and through partnerships with other local independent ILECs and national service provider.

As a wholesale provider, Ritter's role will be that of an enabler for other service providers that need access into the rural markets where it has network facilities while creating a new source of revenue.

"We're actively looking at partnering with either independent telcos in Arkansas or other national providers to create these fiber routes that could provide other carriers access to areas they would not be able to serve on their own," Hatzenbuehler said. "One offshoot of that is being able to provide Fiber to the Tower, which is part of what we have been doing through our wholesale transport division."

For more:
- see the release

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*Article was updated with quotes and perspective from Ritter's CEO and Chairman Dan Hatzenbuehler.