TPG to acquire RCN, Grande for $2.25B from Abry, creating a huge business services challenger

TPG is acquiring regional cable operators Grande Communications and RCN Communications for nearly $2.25 billion in a bid to create a top 10 cable operator business services provider threat.  

What’s interesting about this dual deal is that, according to a Wall Street Journal report, Google Capital is investing alongside TPG. Also, there was growing speculation over the weekend that TPG might be about to make a move into wireless, something that Google Fiber is leaning toward as it struggles to scale its FTTH deployments.

Google, while not making any specific comments about the deal, could potentially leverage the Grande and RCN assets to support either its existing FTTH builds or future forays into millimeter wave wireless, a technology will require fiber-based facilities to backhaul traffic. 

RCN and Grande are currently owned by private equity firm Abry Partners, which purchased the two companies in 2009 and 2010. TPG plans to retain the current management team, including CEO Jim Holanda.

RCN and Grande aren’t exactly in contiguous markets, but they do have sizable fiber footprints. RCN Business currently provides traditional cable, phone and internet services to businesses on the East Coast and Chicago, while Grande offers similar business services in Texas.

TPG’s bid for Grande and RCN comes at a time of rapid consolidation of the cable industry. Some of the sizable deals include Charter Communications’ dual acquisition of Time Warner Cable Inc. and Bright House Networks, Altice's acquisitions of Suddenlink Communications and Cablevision.

While much of the attention on the latest round of cable consolidation has focused on its implications for consumer broadband and video, these acquisitions create larger companies to follow a broader array of business service opportunities and the Grande and RCN deal could have similar implications in the business markets where they operate.

Grande, for one, offers a suite of Ethernet-based data, colocation, video and voice over its own 5,000 miles of fiber in Texas. One of the interesting elements of Grande’s business arm is that it has a commercial development division that evaluates opportunities to extend its fiber network to new and existing buildings in its Texas footprint.

RCN Business has been no less aggressive, expanding its fiber network in key markets to key New York City properties such as the Empire State Building and Telehouse’s NYC data center. At the same time, the service provider has been enhancing its Ethernet and managed network offerings, achieving MEF Carrier Ethernet 2.0 certification and building in new options including 100G and more recently an NFV-based managed security offering.

However, TPG has not indicated what the next steps of investment could be for the two service providers. It’s likely that the VC firm will influence Grande and RCN to continue expanding their fiber networks to address a growing business customer base that’s looking for alternatives to traditional telcos.

For more:
- WSJ has this article

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