Consolidation in the Commuications Mid-Market

The market for mergers and acquisitions is looking up as one publicly listed communications company buys another.

by Alex Goldman ISP-Planet Managing Editor [January 7, 2008]

On December 31, 2007, North Pittsburgh Systems Inc. (NPSI), a company dating back to 1906, was acquired by Consolidated Communications Holdings, Inc. (Consolidated).

The transaction, which includes cash and equity components, was worth approximately $262.5 million. NPSI valued its assets at more than that, with equipment listed on the books at $227.6 million. Net revenue for the 9 months ending September 30, 2007 was $9 million, down from $26 million a year before.

The acquisition shows how the traditional descriptions of ISPs are breaking down. Both companies offer a wide variety of services. NPSI incorporates a traditional ILEC (but one that operates in a big city) and also offers broadband, web design, webhosting, and other services (including metro Ethernet).

Consolidated has three distinct geographic markets (Illinois, Pennsylvania, and Texas) and offers IPTV, telephone service, and DSL, and ancillary services.

Consolidated claims 79,400 DSL subscribers and 11,400 IPTV subscribers and offers services over both ILEC and CLEC lines. That puts it technically off our ISP rankings (you need 100,000 subscribers to qualify) but if Consolidated declared dialup subscribers, it would, we think, be ranked around number 20 in the U.S.

Bob Currey, Consolidated's President and Chief Executive Officer, said in a press release that the company will aggressively launch broadband services in the Pittsburgh area, including IPTV.

Across the board, we expect to see more consolidation in 2008, not only among the ISPs themselves, but also among providers of hardware and software. ISPs will acquire well run companies whose footprint is conveniently near their existing coverage area.

Software companies will extend their portfolio of services, aiming for the total package. Anti-virus companies will acquire anti-spam, IDS companies will acquire filters, and so on.

Hardware companies will also continue to merge, a trend that's been going on for some time (case in point: Alcatel-Lucent).

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