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WIKI ANALYSIS
Consolidated Communications (CNSL) owns established incumbent local exchange telephone companies, (“ILECs”) that provide communications services to residential and business customers in Illinois, Texas and Pennsylvania. Consolidated offers a wide range of telecommunications services, including local and long distance service, custom calling features, private line services, high-speed Internet access, digital TV, carrier access services, network capacity services over their regional fiber optic network, and directory publishing. In addition, they operate a number of complementary businesses, including telemarketing and order fulfillment; telephone services to county jails and state prisons; equipment sales; operator services; and mobile services.[1]
Trends and Forces
Limited Competition
Fixed-line telecommunication: Consolidated is one of a number of rural telecom carriers that operate primarily in markets exempt from direct wireline competition by federal law. While these rural local exchange carriers (RLECs) still face modest competition, generally coming from wireless carriers offering large buckets of minutes, customer retention has been stronger, and their total access-line counts have held up better than those of their Baby Bell brethren.
Line Substitution
RLECs have come under pressure as consumers swap traditional phone lines for wireless substitutes. Analysts have questioned whether these increased access line losses will affect the sustainability of revenue and free cash flow for RLECs. Additionally, extra competition has come in the form of cable companies that offer triple-play packages including voice services.
Industry Consolidation
"Pursue Selective Acquisitions" is one of Consolidated's stated business strategies.[2]
Industry consolidation continues despite tough economic conditions - ex. CenturyTel's $11.6 billion offer for Embarq on Oct. 27, 2008. Consolidated itself is often rumored as a consolidation target.
Consolidated acquired North Pittsburgh Systems, Inc. on December 31, 2007, adding over 127,000 Access Line Equivalents for a total consideration of $375.1 million.[3]
Valuation
In a RLEC industry comparison, Stifel Nicolaus suggests EBITDA per access line is appropriate. [4]
Competition
Other RLECs:
- CenturyTel (CTL)
- Shenandoah Telecom (SHEN)
- Embarq (EQ)
- Fairpoint Communications (FRP)
- Frontier Communications Corporation (FTR)
- Iowa Telecommunications Services (IWA)
- Windstream (WIN)
References
- ↑ CNSL 2007 10-K
- ↑ CNSL 2007 10-K
- ↑ http://www.nptc.com/aboutus_news_consolidated.asp Joint CNSL, NPSI announcement
- ↑ http://www.telecomassn.org/conferences/2004/summer/2008StifelRLECMonitor.pdf
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