WideOpenWest said Wednesday it has agreed to sell systems in five markets in two separate transactions to Astound Broadband and Atlantic Broadband for a combined $1.786 billion, using the proceeds of the sale to pay down debt and fund network expansion.

WOW will sell its Cleveland and Columbus, Ohio systems to Atlantic Broadband in a deal valued at $1.125 billion. Astound will receive WOW’s Anne Arundel, Maryland; Chicago and Evansville, Indiana systems for $661 million. 

News of the deals, expected to close in the second half of 2021, sent WOW stock up 17% ($3.09 each) to $21.34 in early trading Wednesday (June 30)

Atlantic Broadband is part of Canadian telecom and cable operator Cogeco Communications. Last year it was the target of a hostile takeover bid from Altice USA, which with Canadian telecom giant Rogers Communications bid more than $8 billion for Cogeco assets. Cogeco, controlled by the Audet family trust, rejected those bids. 

Astound broadband was created last year after private equity firm TPG sold its stakes in RCN, Grande Communications and Wave Broadband to Stonepeak Infrastructure Partners for $8.1 billion. 

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News of the deal comes about two weeks after WOW chief financial officer John Rego said at an industry conference that the company could sell off portions of its systems if it wanted to deleverage faster. 

“If we wanted to think about deleveraging quicker [and] faster, we could think about selling a market or two of the 19 that we have,” Rego said at the Credit Suisse Virtual Communications conference on June 15. “We’ve done this before. We’ve bought them and we’ve sold them.”

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At the time, Rego noted that deal multiples were rising, pointing to Astound's sale to Stonepeak and CableOne’s purchase of Hargray Communications, transactions that he sad were valued at around 12.5 times cash flow. According to WOW, its Atlantic Broadband and Astound deals are valued at about 11 times cash flow.  

WOW said it would use the proceeds of the sale to pare down debt -- it estimates that its leverage ratio will fall from its current 5 times cash flow to 2.5 times after the deal closes. In addition, it will use some for the money to continue its ongoing edge-out program to expand its network in its service territory. 

"We are pleased to reach these two agreements as WOW! takes a significant step toward accelerating our broadband-first growth strategy at a pivotal time in our industry," WOW CEO Teresa Elder said in a press release. "The substantial proceeds from these transactions reflect the attractiveness of our assets and the clear opportunity to expand our position as a trusted provider of reliable, accessible and fast broadband solutions. The divestiture of these markets will enable us to reduce our debt as we continue to execute our broadband-first strategy, including pursuing our Edge-out and greenfield strategies and expanding our commercial services."

WOW will continue to operate in 14 service areas in Alabama, Florida, Georgia, Michigan, South Carolina, and Tennessee.  On a pro forma basis as of March 31, the company would have had about 532,000 total subscribers, and 506,000 high-speed data revenue generating units. 

The company said it “anticipates some employees from each of the sold markets will remain with WOW, some may be integrated into Atlantic Broadband and Astound Broadband, and others may leave the business.”

BofA Securities is acting as financial advisor to WOW, and Wachtell, Lipton, Rosen & Katz as well as Honigman LLP are serving as legal counsel.

Altice USA is moving forward with plans to push its fiber network to the edges of its traditional footprint, adding at an industry conference that it is on target to add about 150,000 homes this year and expects more to come. 

Altice USA chief financial officer Michael Grau said at the virtual Credit Suisse Communication Conference Tuesday that most of the company’s edge-out program is concentrated in Texas, but other markets are expected to follow.

Other cable operators have been expanding their fiber footprint for years, with Comcast and Charter adding about 1 million homes passed to its territory each year over the past few years.

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At the Credit Suisse conference, Grau said that Altice hasn’t done its budgeting for next year yet, but that a target of 175,000 to 200,000 additional homes via edge-out “probably makes sense in 2022.”

Currently, he said the edge-out efforts are heavily concentrated in Texas, particularly in the Dallas, North Austin and west Texas markets. Grau added Altice USA has systems in three of the top five markets for new household formation in the country, and that future edge-out efforts will focus on those areas, as well as in North Carolina, where in April it purchased Morris Broadband for about $310 million. 

“There’s really ample opportunity between our different footprints to really accelerate new builds at very very attractive economics,” Grau said.

Altice USA also is working hard to upgrade its Suddenlink network. Grau said there are between 600,000 and 700,000 homes within its Suddenlink footprint that still offer speeds under 100 Megabits per second, some as low as 25 Mbps to 30 Mbps. 

“Not coincidentally, customer penetration is significantly lower than what we’re seeing in the remainder of the western footprint,” Grau said, adding that the plan is to bring those areas back up to speed, estimating that  Altice USA could upgrade about 300,000 of those homes this year.    

Charter Communications unveiled a plan Monday to spend about $5 billion to expand its broadband network to underserved homes.

The initiative, funded in part by $1.2 billion the company received through the Rural Digital Opportunities Fund, will be in addition to the company’s ongoing edge-out programs to extend its broadband footprint. As part of the new plan, Charter said it will hire about 2,000 new employees and contractors.

Charter has been aggressively expanding its footprint over the past few years, partly due to conditions set for approval of its 2016 purchase of Time Warner Cable. Last year, the company expanded its homes passed by nearly 1 million homes.  

Preparation for the expansion has already begun and Charter said it would expand its existing construction organization in order to focus on deployment of the network. The expansion will extend service to more than 1 million homes and businesses in 24 states: Alabama, California, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Michigan, Missouri, New Hampshire, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Vermont, Virginia, Washington, and Wisconsin.

Charter said it will offer 1 Gigabit per second (Gbps) high–speed broadband access to all newly served customer locations with starting speeds of 200 Megabits per second, enabling consumers to engage in remote learning, work, telemedicine and other applications that require high-bandwidth, low-latency connectivity.  

"The pandemic has further highlighted the need for broadband availability and adoption and Charter is committed to furthering its efforts as part of the comprehensive solution needed to address these challenges," Charter chairman and CEO Tom Rutledge said in a press release. "As Americans across the country increasingly rely on broadband to work, learn, access healthcare and stay in touch with family and loved ones, bringing broadband access to more unserved areas should be a priority for all stakeholders. Charter's new multibillion-dollar buildout initiative further highlights the importance of the sophisticated broadband networks that the U.S. cable industry has built over several decades, and the industry's commitment to the local communities it serves. As we continue to help provide more Americans with reliable access to the internet ecosystem, our hope is that federal, state and local authorities, other private companies, pole owners and broadband providers will work together and play a pivotal role in expanding networks to unserved areas."

Charter said the initiative is reliant on several external factors, including utility pole permitting and "make-ready" processes. Because there are fewer homes and businesses per utility pole in these areas, the company will need access to multiple poles for every home served. As a result, pole applications, pole replacement rules and their affiliated issue resolution processes are all factors that can have a big impact on the length of time it takes to build into these rural areas. 

Pole attachment regulation has been an ongoing issue for the industry since its inception. Recently, NCTA- The Internet and Television Association, asked the Federal Communications Commission to clarify that they don't have to pay the full cost of replacing a utility pole when extending their networks into rural areas. 

Earlier this month, the FCC issued a clarification that was a partial victory for the industry,  prohibiting pole owners from charging full freight only when the sole reason for replacement is the operator's request to attach to that pole. 

"The more cooperation we have with the pole owners and utility companies, the faster we can connect these communities with high-speed internet services,” Rutledge said in the press release. “We look forward to working with local municipalities, electric cooperatives, and investor-owned utilities to ensure that permits are obtained in a timely, fair and cost-effective fashion."

WideOpenWest continues to grow its high-speed internet business through its so-called “edge-out” strategy, adding 7,900 high-speed data customers in the third quarter.

But overall revenue for the Englewood, Colorado-based midsized cable operator dipped 2.1% to $285.4 million in the quarter, as WOW lost another 6,300 video subscribers. In short, the 9.4% improvement in residential broadband revenue to $11.2 million couldn’t offset the 10.8% decline in TV services revenue to $12.9 million.

Still, the video subscriber performance represented an improvement over the 7,100 users lost in the third quarter of 2018. And WOW sustained progress on its longer term goals, which are to grow revenue in the areas of residential broadband and business services. Subscription revenue for the latter grew 5.2% in Q3 to $34.7 million.

WOW ended Q3 with 773,900 broadband users, penetrating 24.1% of a footprint that grew by 14,000 homes in Q3 through the edge-out scheme. WOW said the edge-out growth resulted in the addition of 1,900 broadband subscribers in Q3.

During Friday’s earnings call with equity analysts, WOW CEO Teresa Elder was asked about WOW becoming a “hub” for OTT services, as opposed to a traditional video distributor.

“We feel very good about our ability to provide streaming services and we believe customers come to us specifically for that,” Elder said. (Transcript provided by Seeking Alpha.) “So it's definitely something that we encourage. And I believe that with the whole-home WiFi product, it's just an excellent customer experience. So we definitely embrace those changes.”

WideOpenWest continues to grow its high-speed internet business through its so-called “edge-out” strategy, adding 7,900 high-speed data customers in the third quarter.

But overall revenue for the Englewood, Colorado-based midsized cable operator dipped 2.1% to $285.4 million in the quarter, as WOW lost another 6,300 video subscribers. In short, the 9.4% improvement in residential broadband revenue to $11.2 million couldn’t offset the 10.8% decline in TV services revenue to $12.9 million.

Still, the video subscriber performance represented an improvement over the 7,100 users lost in the third quarter of 2018. And WOW sustained progress on its longer term goals, which are to grow revenue in the areas of residential broadband and business services. Subscription revenue for the latter grew 5.2% in Q3 to $34.7 million.

WOW ended Q3 with 773,900 broadband users, penetrating 24.1% of a footprint that grew by 14,000 homes in Q3 through the edge-out scheme. WOW said the edge-out growth resulted in the addition of 1,900 broadband subscribers in Q3.

During Friday’s earnings call with equity analysts, WOW CEO Teresa Elder was asked about WOW becoming a “hub” for OTT services, as opposed to a traditional video distributor.

“We feel very good about our ability to provide streaming services and we believe customers come to us specifically for that,” Elder said. (Transcript provided by Seeking Alpha.) “So it's definitely something that we encourage. And I believe that with the whole-home WiFi product, it's just an excellent customer experience. So we definitely embrace those changes.”