Consolidated sells off Kansas City assets to double down on fiber markets

Consolidated Communications struck a deal to sell its assets in Kansas City to Alinda Capital Partners for an undisclosed sum, marking its second such deal in less than a year.

The operator’s operation in the city includes 19,000 consumer subscribers, 13,000 consumer broadband customers and 1,900 commercial subscribers. The market generated approximately $50 million in revenue in fiscal 2021.

On an earnings call, Consolidated CFO Steve Childers said the operator decided to ditch its holdings there to focus more closely on markets where it plans to build fiber.

“The Kansas City market is our most competitive market, where we have a hybrid DOCSIS and fiber network. We did not have any fiber upgrades planned in the market,” he explained. Childers added the unspecified sale price is subject to certain adjustments, but Consolidated expects net proceeds from the deal will be approximately $90 million. The deal is expected to close in the second half of this year.

The move comes as Consolidated continues a strategic review of its assets to determine where it wants to invest in fiber and where to divest its holdings. It has already identified locations in California, Illinois, Maine, Minnesota, New Hampshire, Pennsylvania, Texas and Vermont as fiber build markets, but has operations in 14 other states. In September, it inked a deal to sell its Ohio assets to Middle Point Home Telephone Company. That transaction closed last month.

Consolidated previously laid out a plan to extend its fiber footprint to a total of 1.6 million locations by 2025. It added 331,000 passings for the full year 2021, increasing its total number of fiber passings to 606,000, or 22% of its overall footprint. Approximately 111,500 of those locations were added in Q4 alone. Childers reiterated it is aiming to add another 400,000 locations next year to boost its fiber cover to over 1 million locations or 37% of its footprint.

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The operator added 4,500 fiber customers in Q4 and 15,512 for the full year. However, DSL and copper losses continued to outpace this growth. Consolidated shed 10,680 DSL and copper customers in Q4, leaving it will a net loss of around 6,000 broadband subscribers for the quarter.

Childers said Consolidated expects it will be able to flip this script later this year as fiber additions continue to ramp.

“20% of our adds on fiber are transitions or converting DSL to fiber, but roughly 80% are net new adds. So we will outpace that decline and go net broadband positive in the second half of this year and from there follows the revenue and EBITDA growth,” he said.

Overall revenue fell 2.3% in Q4 to $318.5 million and 1.7% for the full year to $1.28 billion. The company posted net income attributable to shareholders of $12.4 million in Q4 and a loss of $109.8 million for the full year.