Consolidated Communications Holdings is acquiring Enventis (News - Alert) Corporation, formerly HickoryTech, for $350 million, continuing a pattern of “growth by acquisition” for Consolidated Communications, but also likely indicating that Enventis management was not strongly convinced Enventis could keep growing in the future.
In fact, Enventis predicted total 2014 revenue (gross, net, cash flow) would be about the same as 2013 results.
In 2013, revenue was $189.2 million, up three percent. Operating income in 2013 was $17.6 million, down nine percent.
Net income in 2013 was $7.7 million, down $566,000 from 2012.
Prior to the acquisition, Enventis had forecasted 2014 revenue between $189 million and $199 million, with the main trend being growth of business and broadband revenue and declines in voice revenue. In other words, revenue growth was most likely going to amount to $5 million, on an annual basis.
Net income was expected to be in a range of $6.4 to $8.4 million, possibly less than earned in 2013.
EBITDA in 2014 was expected to be in a range of $47 million to $49.5 million. In 2013, EBITDA was $47 million.
The big story, however, is that new revenues would not offset all the legacy services losses.
Enventis expected flat to slightly-higher 2014 gross revenue, flat net income and EBITDA. So despite the robust new revenue growth, Enventis was on track to see revenues, profits and cash flow stall.
The larger company (Consolidated plus Enventis) will have $785 million in revenue and $332 million in adjusted EBITDA for the 12 months ending March 31, 2014.
As has been the case for Windstream (News - Alert) Communications and Frontier Communications, business revenues have proven to be crucial for Enventis, and increasingly also are the story for Consolidated Communications (News - Alert).
On a larger scale, that is the fundamental problem facing rural and many independent telephone companies. Growth has been driven by the business segment, and that segment is relatively small in most rural markets.
Edited by Maurice Nagle
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