Entries in Windjammer Cable (2)


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.


Windjammer Deals More of its Cable Assets

All West Communications Expands Wyoming Footprint

Utah-based All West Communications has expanded its presence in Wyoming, acquiring cable assets and customers from Kansas-based Windjammer Cable. In a deal announced on September 26th, the broadband service provider will acquire Windjammer’s 1,300 customers in Evanston, an area that All West has served for the past ten years.

Headquartered in Kamas, Utah, All West is an independent telecommunications company that provides Internet, phone, and cable television services. The company’s history dates back to 1912, when it began offering telephone services in Rich County, Utah. It has since expanded its service area to include Wasatch and Summit Counties in Utah, and Uinta and Lincoln Counties in Wyoming. 

According to Phone Lines 2011, All West serves around 6,000 access lines and 5,114 broadband connections in its territories. Since 2003, All West has served the new service areas that it has entered, including its Evanston market, with FTTH technology and is in the process of migrating 100% of its customers to fiber based services.

The Evanston system deal is the second cable sale for Windjammer in 2011 and its fourth since May 2010. On August 1st, Windjammer completed the sale of its Georgia and Alabama cable systems and 17k customers to Charter (Nasdaq:CHTR). The deal followed a busy 2010 for Windjammer, during which it sold its Greenville, Mississippi-based cable system and 8,000 customers to Suddenlink and also dealt cable assets in Bonners Ferry, Idaho to Country Cable. After unloading these properties, Windjammer still operates cable systems in California, Montana, Missouri and Texas, among other areas.

The cable assets Windjammer is dealing are former Adelphia-operated cable systems that have switched hands frequently in the past five years. As part of Adelphia’s bankruptcy proceedings in 2006, Time Warner (NYSE:TWC) and Comcast (Nasdaq:CMCSA) acquired multiple Adelphia cable systems and 5.1m customers across the United States. Time Warner held onto the systems it acquired in the more heavily populated, urban areas and jettisoned the remaining cable systems to private equity firm, MAST Capital Management, and Florida-based cable operator, Communication Construction Services in 2008. The pair in turn created Windjammer, which has operated the former Adelphia/Time Warner systems which serve 80k rural customers.

While financial terms of the All West purchase have not been disclosed, some recent sales of Windjammer’s cable assets provide us with a reference point for the deal’s potential value.

Time Warner reportedly paid $3,500 per sub when it acquired its 3.3m customers from Adelphia in July 2006. Upon selling the more rural systems to Windjammer in 2008, Time Warner lost around $45m—or about $563 per sub—translating to a price tag of $235m paid by Windjammer ($2,940 per sub). More recently, Suddenlink paid $20.3m for Windjammer’s Mississippi cable system at a cost of $2,538 per sub. Given a potential range of $2,500-$3,000 per customer, the price tag for the Evanston system can be estimated around $3.3m to $4m. 

The All West cable purchase is consistent with a developing trend in recent cable deals: buyers are expanding their service areas around existing footprints and more often than not are looking to offer fiber-based services to the cable customers they acquire. Given Windjammer’s remaining stable of cable systems across the U.S. and its eagerness to sell during the past two years, look for similar cable deals involving adjacent providers down the road.