Shortly after agreeing to purchase three WideOpenWest properties in the Midwest for about $661 million, Astound Broadband CEO Jim Holanda said the deal will double his company’s potential presence in the Chicago area, adding key neighborhoods in the city’s south side and western and northwestern suburbs, while growing its footprint in Washington, D.C by about one-third.
Astound was one of two companies that agreed to buy five properties from WOW for a combined $1.786 billion. Atlantic Broadband agreed to purchase WOW’s Cleveland and Columbus Ohio systems, with about 196,000 customers, for $1.125 billion. The deal is expected to close in the second half of the year.
For Astound, the WOW deal is its first substantial purchase since agreeing to be bought by private equity company Stonepeak Infrastructure Partners for $8.1 billion. That deal, first unveiled in November 2020, is set to close shortly. In an interview, Holanda said the final government approval -- of the 259 that were required -- is expected from the California PUC in about four-to-six weeks.
“We’re looking forward to getting that last one done,” he said.
Astound includes RCN, Grande Communications, enTouch Communications and Wave Broadband, and is the sixth largest cable company in the country, operating in eight states and Washington, DC. The WOW deal involves about 128,000 residential and business customers and passes a collective 700,000 homes. Also as part of the deal, Astound agreed to purchase WOW’s Evansville, Indiana operations, with which it has no adjacent systems.
But it appears that the deal will have its biggest impact in Chicago. RCN has been offering service in Chicago since 1999, primarily in what is known as Area One (downtown, the north side along Lake Michigan and extending to the northern and northwestern suburbs). The Anne Arundel purchase will boost Astound’s presence in Washington D.C., where it has been operating since 1996, by about one-third.
“Dating back maybe seven or eight years, we’ve had conversations with WOW’s management team about Chicago because we knew it would be a good fit,” Holanda said. “For whatever reasons they decided to formally put the process in place to explore potential sale opportunities for certain assets. Clearly the Chicago and Maryland cluster they put on the market was designed for our interest given the close proximity to our existing operations and networks. We’re very happy it all came to fruition over the past few weeks and months.”
Holanda said the WOW systems are in good shape -- they are DOCSIS 3.1 compliant as are the rest of Astound’s properties -- and won’t require too much upgrade investment. While the penetration rates in those areas are lower than in some other WOW markets, the Astound chief sees it as a growth opportunity.
“We think there is runway to continue to grow and take share over time,” Holanda said, adding that with the purchase Astound will pass about 800,000 homes in the market. In Washington D.C., the deal expands the footprint to 400,000 homes passed.
In Chicago, Astound competes against Comcast and AT&T, and in Washington D.C., it goes up against Comcast and Verizon’s Fios. Holanda said the added bulk will give it an added advantage in what has already been a healthy competitive relationship.
“I like to think we have been a strong competitor in both of those markets, certainly in the 11 years we’ve been operating RCN, and I would expect to continue to be a strong competitor against them in these two markets as we go forward,” Holanda said. “Competing against Comcast and Verizon and AT&T on a regular basis for the past decade, I think we’re always aggressive in trying to sign up customers onto our broadband platform. We’ll continue to do that with the WOW markets once we take ownership."
Astound has been an aggressive participant in the deal market. It was created after TPG bought RCN and Grande Communications in 2016 for $2.25 billion, and the private equity player later added Wave Broadband in 2018 for $2.36 billion and enTouch Communications in September 2020. Under Stonepeak’s tutelage, Astound closed its purchase of small California fiber company Digital West about a month ago.
Holanda said that the WOW purchase is no harbinger of a buying binge anytime soon, adding that the company regularly looks at deals as well as organic growth opportunities.
“Clearly with a new long-term infrastructure equity investor like Stonepeak, being able to do accretive M&A has always been something that we have done,” Holanda said. “And whether that was with ABRY our original owner, whether it’s been with TPG when we bought Wave [Broadband] and enTouch and now with Stonepeak going after WOW, we’re continuously looking at those opportunities that are on the market and try to create opportunities where we have contiguous cable properties, that are of interest to us. I think we will obviously continue to do that with Stonepeak. But we are also pretty disciplined when it comes to M&A and we need to make sure that it's going to be accretive and operationally we can take on that challenge on behalf of customers.”
Other operators have been looking at smaller deals as consolidation has limited the number of players available. In the past 12months, Altice USA, which gave up on its $8.1 billion attempt (with Rogers Communications) to take over Atlantic Broadband parent Cogeco Communications in November, has closed deals for tiny Service Electric Cable TV. of New Jersey for $150 million and North Carolina broadband provider Morris Broadband for about $310 million.
Holanda added there appears to be more smaller operators willing to do deals than in the past.
“At any given time we have a handful of opportunities that we are evaluating,” Holanda said. “That’s been pretty consistent over the last couple of years. If you think about how cable valuations have expanded over these last four or five years, I do see smaller deals like enTouch and Digital West -- just a couple of thousand homes outside of our Seattle market. We’ll continue to look for tuck-in acquisitions that are contiguous to our existing operations and we think we can provide a long-term investment platform to upgrade and/or integrate into our ecosystem.”
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Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.