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Consolidation in US broadband as PE firm looks to exit

Cable One has agreed to pay $574.1 million in cash for a big stake in rural broadband group Mega Broadband Investments (MBI).

The deal brings further consolidation to the US broadband market, where small and medium-sized players have been teaming up for years. But more noteworthy is the fact that for once this is a case of a private equity company selling to a telecoms company, rather than the other way round.

Cable One, owner of the Sparklight and Clearwave brands, will pick up a 45% minority stake in MBI from PE firm GTCR and has brokered a further deal to acquire the remainder from 2023 onwards, the price of those shares having been agreed based on undisclosed earnings multiples.

“This transaction represents the next step of MBI’s ongoing transformation, and I am excited to have the backing of Cable One alongside GTCR,” said Phil Spencer, who founded MBI in partnership with GTCR three years ago and serves as the company’s CEO.

MBI was created with a clear aim: “[to] focus on acquiring broadband assets as part of a strategy to build a market-leading company in the space.” It was certainly true to its word regarding acquisitions. It completed the acquisition of cable TV and broadband provider Northland Communications in October 2018 and the following year announced the purchases of the broadband assets of Eagle Communications and the entirety of Vyve Broadband, all for undisclosed sums.

The three companies all have fragmented footprints, offering services in various markets across 16 states between them. MBI united the three under the Vyve Broadband brand earlier this year and part of what it described as “part of the multi-million-dollar capital investment that is being made to upgrade the rural cable infrastructures to close the digital divide, capture high-speed data penetration and accommodate commercial services growth.”

At the time, Spencer said the unification would aid in the firm’s drive to launch Gigabit broadband services in under-served markets that have to date been overlooked by other providers. Six months on and the company is once again scaling up, becoming part of the Cable One stable.

“MBI has developed an excellent network in geographies complementary to our existing footprint and we are excited to share in its future growth. MBI’s operating model and local-first focus mirrors our own,” said Julie Laulis, President and CEO of Cable One.

Cable One serves around 900,000 residential and business customers across 21 states. Vyve Broadband said its network passes around 630,000 homes, but did not provide uptake figures.

Presuming the firms’ coverage areas are truly complementary, the decision to scale up makes lots of sense, particularly in a market like the US, which comprises something in the region of 120 million households; despite all the M&A manoeuvring, Cable One/Vyve remains small fry.

Clearly GTCR believes scale is the answer, given that it has agreed to exit over the coming years. It’s probably too early to start talking about private equity investors and the like handing back the financial opportunities inherent in infrastructure assets in a broader sense though. Indeed, GTCR itself continues to focus on the TMT sector, amongst others; just this month in-flight Internet company Gogo disclosed that GTCR has acquired 14.8% of its common stock.

  • Cable Next-Gen Technologies & Strategies


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