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Thursday
Feb102011

ILEC Sales Closing in 2010 Approach $10b

16 ILEC Sales Closed in 2010, led by Frontier’s Acquisition of 4.1m Verizon Lines

16 ILEC transactions closed during 2010, that compares to 18 deals that closed in 2009, 19 that closed in 2008 and 20 that closed in 2007.  Total transaction value approached $10b, down from $13.8b in 2009 but well above the $2.5b that closed in 2008 and $3.5b that closed in 2007.

The list of 2010 ILEC transactions is dominated by Frontier Communication’s (NYSE:FTR) $8.6b acquisition of what was, at the time the deal was announced on May 13, 2009, approximately 4.8m Verizon (NYSE:VZ) access lines in 14 states.  Some 414 days later, when the transaction closed on July 1, 2010, the number of lines Verizon transferred had declined to less than 4.1m access lines.

Two other large transactions that closed in 2010 were Windstream’s (Nasdaq:WIN) $956m acquisition of Iowa Telecom and the National Rural Utilities Cooperative Finance Corporation’s (CFC) acquisition of Innovative Communications.  The Iowa Telecom deal was one of six deals Windstream ceo Jeff Gardner has orchestrated over the past 19 months as he continues his efforts to redefine Windstream into a “business and broadband” communications services provider.  The Innovative deal was the culmination of a long, litigious process that saw the parent of the former Virgin Islands Telephone Company file bankruptcy.  CFC, which through its subsidiary Rural Telephone Finance Cooperative had lent Innovative over $525m, acquired the company out of bankruptcy with a $250m credit bid.

Arvig Communications was the most active of the RLEC market makers, closing on two transactions during 2010.  Arvig acquired Redwood Falls, Minn.-based Redwood County Telephone Company and its subsidiary Clements Telephone Company on December 17, 2010 and, twelve days later, closed on its acquisition of Melrose, Minn.-based Diversicom and its subsidiary, Melrose Telephone Company.  Arvig has been a major player in the Minnesota deal market over the last few years.  On September 15, 2009 Arvig closed on its acquisition of Grand Meadow, Minn.-based Home Telephone Company.  Back in 2006, Arvig teamed up with New Ulm Telecom and Blue Earth Valley Communications to acquire Hector, Minn.-based Hector Communications in a $119.8m deal.  And in July 2005, Arvig spent $30.5m acquiring the Minnesota RLEC operations of Otter Tail Corporation. 

American Broadband made its way back to the deal table in 2010 for the first time since its July 2009 acquisition of Anchorage, Alaska-based TelAlaska with its acquisition of Sulphur, La.-based Cameron Communications.

A number of the deals closing during 2010 had an insider twist.  TOTE Holdings, which in September closed on its acquisition of Deleon, Texas-based Totelcom Communications (formerly Comanche County Telephone Company), is owned by Tony Prather, the long-time manager of Totelcom.  Kendell Mikesell and Elaine Webb acquired the remaining portion of Clearwater, Kan.-based Southern Kansas Telephone Company from exiting family members.  Jeff Leslie acquired Indiantown, Fla.-based Postco and its subsidiary ITS Telecommunications Systems (formerly Indiantown Telephone Company) from the estate of Postco’s former owner, Robert Post.  Leslie was the cfo and president of Postco before buying the company.  And Sunshine PCS, a publicly traded affiliate of LICT Corporation, acquired Nome, N.D.-based Inter-Community Telephone Company in a structured acquisition from LICT.  Even Arvig’s acquisition of Diversicom had a related party twist to it.  The former president of Diversicom, Tom Arvig, is a cousin of Allen Arvig, president and ceo of Arvig Communications.

     

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