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Windjammer Deals Again, Caps Off a Busy 2011

Kansas-based MSO Deals Rural Cable Systems to Montana ISP

MontanaSky West LLC, a Montana-based CLEC and Internet service provider, announced last week that it had acquired a pair of cable systems from Kansas-based Windjammer Cable, in a transaction that closed on December 19th. In the deal, MontanaSky picked up the Libby and Troy cable systems in Western Montana and approximately 1,400 customers from the deal-happy Windjammer. Financial terms of the acquisition were not disclosed.

The sale is a fitting way to close out what was a busy year for Windjammer, having closed on a pair of deals earlier in the year.  The rural MSO sold systems in Georgia and Alabama to Charter in March, and later jettisoned its Evanston, Wyoming system to All West Communications in late-September. The company apparently decided to stay out west after the Wyoming system deal, and found an eager buyer for its Montana cable assets in MontanaSky West.

Headquartered in Kalispell—which is right next door to Libby and Troy—MontanaSky serves approximately 10,000 customers with a variety of communications services. It provides wireless broadband Internet from its two towers in Kalispell, retails both DirecTV and Dish Network satellite services, and offers a variety of business services including website hosting and server virtualization utilizing its two data centers.

MontanaSky had been actively planning to build fiber out to Libby and Troy prior to acquiring Windjammer’s cable systems.  Earlier this year, the company announced on its website that it was building middle mile fiber to the towns, hoping to land a $4m RUS loan from the USDA to fund the project.  While it has not yet been awarded the loan, MontanaSky founder Frederick Weber has reinforced that improving Internet service in Libby and Troy is still his top priority after acquiring the cable systems from Windjammer.

“The first thing we do (after the Windjammer acquisition) is finish the long awaited fiber-optic line to Kalispell from Libby, which will supply us with an unlimited supply of bandwidth, which will stop the periods of internet slow downs during peak periods and increase speeds to way over those available now or those speeds over phone line DSL.”

Also on the top of Weber’s to do list: get telephone service up and running in its newly acquired service areas. According to the company’s press release, MontanaSky is engineering its cable plant to deliver voice service to customers in Libby and Troy. Frontier currently offers the only voice service in the region. 

Using Windjammer’s past priced transactions and recent observed cable multiples as a proxy, we can estimate the price tag for the two cable systems. Charter shelled out $2,500 per sub to Windjammer for its Georgia and Alabama systems earlier this year, while cable deals in 2011 have been done at an average per sub multiple of $2,286. Using a range of $2,286-$2,500 per sub, we can estimate a price of $3.2m to $3.5m paid by MontanaSky. If these estimates are in the ballpark, Windjammer is most likely taking a loss on the deal. The cableco paid just under $3,000 per sub to Time Warner for all of its cable systems back in 2008.