Constitution makes uncommon acquisition amid concentrate on rural community expansions

M&A alternatives have been onerous to return by for US cable operators, however Constitution Communications evidently has discovered one in Maine.

Constitution has reportedly struck a deal to accumulate Bee Line Cable, a small operator that serves communities in central Maine, together with Anson, Madison, Farmington and Millinocket. The Franklin Journal, an area paper, reported that the deal needs to be finalized someday this spring.

(Supply: Constitution Communications)

Constitution already has a robust presence in Maine by way of its 2016 acquisition of Time Warner Cable. Bee Line Cable GM George Allen instructed the paper that curiosity in buying the cable operator goes again to the TWC days.

“Time Warner was all the time knocking on our door as a result of our properties are fairly good,” Allen mentioned. He added that he expects Constitution to “choose up the bulk” of Bee Line Cable’s workers.

Based on the Bee Line Cable web site, the operator was based in Houlton, Maine, by the late Owen Hannigan and a associate in 1954, and expanded by the years by way of a string of purchases of close by cable methods. Hannigan is a member of the Cable TV Pioneers. Heading into the Constitution deal, the enterprise has continued to be managed by the Hannigan household, led by Owen’s son, Paul Hannigan, who serves as president of Bee Line Cable.

It isn’t instantly clear how the acquisition will match into Constitution’s community evolution plans. The plan for almost all of Constitution’s deployed hybrid fiber/coax (HFC) community is to implement a distributed entry structure alongside the usage of a digital cable modem termination system (vCMTS) to ship multi-gigabit downstream speeds and as much as 1-Gig within the upstream.

Bee Line Cable’s present broadband service tops out at 500 Mbit/s downstream and 20 Mbit/s upstream, relying on the placement. It additionally markets a managed Wi-Fi service for an additional $4 monthly.

M&A stays an outlier

The Bee Line Cable acquisition arrives amid a dearth of cable system M&A exercise.

Constitution has been taking an opportunistic method to M&A. But it surely’s been way more targeted on increasing by community edge-outs and new builds in rural areas, together with fiber builds aided by authorities subsidy applications such because the Rural Digital Alternative Fund (RDOF). Constitution can be anticipated to take part within the $42.45 billion BEAD (Broadband Fairness, Entry, and Deployment) program.

Constitution CEO Chris Winfrey has likened the returns on these rural community buildouts to cable M&A.

“You are primarily constructing a cable firm right here over a number of years from scratch,” Winfrey mentioned of the RDOF alternative again in 2021, when he was Constitution’s COO. “We expect the returns are engaging.”

Others appear to agree that Constitution’s rural focus is cash nicely spent.

Whereas some buyers do not see rural buildouts as a transfer that drives thrilling returns, “[o]ur evaluation means that Constitution creates 4-5x as a lot worth with each greenback they put money into rural than with share repurchases at present costs,” the analysts at New Avenue Analysis mentioned in a latest report. “They’re additionally much better off investing in rural than shopping for extant Cable belongings.”

Whereas there is not any telling if any further M&A alternatives will come Constitution’s approach in 2023, the corporate is predicted to construct about 300,000 sponsored rural passings this yr.

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— Jeff Baumgartner, Senior Editor, Mild Studying

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