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Tuesday
Oct252011

Satview Broadband Targets Cable Systems in Nevada

WENR Subsidiary Signs Letter of Intent to Acquire NV Cable Assets

On October 12, Nevada-based WENR Corporation (OTC:WNRC.PK) announced that its wholly-owned subsidiary, Satview Broadband signed a letter of intent to acquire its seventh cable system in Nevada. Earlier in 2011, Satview expanded its Nevada cable footprint in a deal with Baja Broadband, and it continues to target more properties in the rural towns located near its current service areas.

Reno-based Satview Broadband was started in 1999 by president Tariq Ahmad as an MSO, initially operating three cable systems in Nevada. After ten years of operations, Satview was purchased by WENR, a media holding company, in a deal that closed July 1, 2010. Ahmad received 5m shares of WENR in the deal, valued at approximately $300k, and continues to manage the day to day operations of the company. Shortly after the WENR deal, Satview turned into a buyer, acquiring three cable systems in northern Nevada from Baja Communications for $800k.

Dan Green, ceo of WENR Corporation, commented on WENR’s cable system acquisition strategy following the system purchase from Baja Broadband. "We are in the process of integrating two cable providers (Satview and Baja). We know exactly what we are looking for in opportunities and believe we have found several acquisition targets," noted Dan Green, CEO of WENR Corp.

The opportunities that WENR and Satview seek: to expand service area around Satview’s existing footprint in Nevada, and to increase ARPU through the bundling of services and system upgrades. The company is currently investing to upgrade Internet and voice services in its service areas in Elko, Carlin and Battle Mountain that were acquired from Baja Broadband. Its goal is to increase market saturation to 50% of the 16k homes in the region, up from the approximate 25% penetration level at the time the systems were acquired.

Following the Baja Broadband asset purchase, Satview now operates cable systems in six Nevada markets: Elko, Battle Mountain, Carlin, Jackpot, Wells and Topaz Lake. It generates approximately $3m annually in revenue and will more than double that figure following the close of its most recent purchase. In WENR’s press release announcing Satview’s system acquisition, the company indicated that the target property generates over $3m per year. 

According to a June 2011 presentation to investors, WENR indicated that Satview was looking at three specific systems in close proximity to its current operations as acquisition targets. It indicated that system #1 serves 900 subs and generates $700k annually, and system #2 serves 1,200 customers and generates $1m annually.  The third property WENR mentions, presumably the subject of its recent letter of intent, serves 3,300 customers and generates around $3.2m per year, or approximately $1k per customer.

Using the numbers from of Satview’s Baja purchase as a benchmark, we can derive an estimate for the price tag of its recent target. In that deal, Satview acquired 4,000 customers and paid only around $200 per sub, shelling out $800k for the three systems. Based on a price of $200 per sub and 3,300 subs, we can imply a purchase price of around $660k for its recent cable purchase, translating into a revenue multiple of well under 1x. The low deal multiples in both cases make sense given that the systems are located in sparsely populated, rural areas. 

While the targeted cable property and its current owner remain unnamed, a handful of cable systems in Nevada are logical targets for Satview. Charter, which divested cable assets in Nevada in 2006 and looked to sell its Los Angeles systems earlier in 2011, operates multiple systems near Satview’s Topaz Lake operations. 

Based on WENR’s presentation to investors in June, Satview doesn’t figure to be away from the deal table for long following the close of this acquisition. When forecasting forward looking revenues for Satview, WENR management estimated $9m per year, factoring in revenues for all three targeted systems mentioned above.  One down, two to go.

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