July 19, 2012
Cogeco Cable Inc., a Montreal-based cable-television company, agreed to buy Atlantic Broadband for $1.36 billion, letting it expand into the U.S. after a failed attempt to gain a foothold in Europe. Cogeco is purchasing the company from private-equity firms Abry Partners and Oak Hill Capital Partners in a deal that's expected to be completed by year-end, the Canadian company said today in a statement. Quincy, Massachusetts-based Atlantic Broadband operates cable systems in Pennsylvania, Florida, Maryland, Delaware and South Carolina.
Cogeco Cable chief executive Louis Audet said in Wednesday's announcement that Atlantic Broadband provides "an attractive entry" into the U.S. market. "There are sizable opportunities for growth including: increasing the penetration of the small and mid-sized business segment, and maximizing the bundling potential of services in the residential sector." Audet said. "We are very pleased to welcome all the employees of Atlantic Broadband into our organization."
Atlantic Broadband was formed in 2003 after it purchased cable systems from St. Louis-based Charter Communications Inc. It currently ranks as the 14th-largest U.S. cable operator, according to the company's website. Atlantic Broadband serves about 252,000 basic video customers, and provides cable, phone and Internet to rural communities. That suits Cogeco's experience of offering service in less-populated areas of Quebec and Ontario, Chief Executive Officer Louis Audet said. "There is room as you can see for further U.S. growth, in contrast to Canada," he said on a conference call today. The purchase helps reduce Cogeco's dependence on its market, where it competes with larger cable operators Rogers Communications Inc., BCE Inc., Telus Corp. and Shaw Communications Inc. "This is an attractive entry point into the United States," Audet said. The deal also positions Cogeco to make further "tuck-in" acquisitions, he said.
The Cogeco transaction follows several strategic cable acquisitions, including Time Warner Cable Inc.'s $3 billion takeover of Insight Communications Co. in February and WideOpenWest LLC's deal completed yesterday to buy Knology for about $1.5 billion including debt. Cogeco is paying 8.3 times Atlantic Broadband's estimated annual earnings before interest, taxes, depreciation and amortization, the company said in the statement. Time Warner Cable paid 8.6 times Ebitda, while WOW paid 7.7 times, according to Bloomberg Industries. Cogeco is paying about $5,400 on a per subscriber basis. That compares with $4,418 in the Time Warner deal, and $5,486 in the WOW transaction, the Bloomberg Industries data show.
Bloomberg reported in May that Atlantic was seeking a sale at a price of about $1.4 billion. Gleacher & Co. was the financial adviser on the transaction, Cogeco said. Bank of America Merrill Lynch served as sole lead arranger and providing debt financing at Atlantic Broadband.
BC Partners Ltd. and Canada's second-biggest pension fund agreed to buy U.S. cable operator. Suddenlink Communications for $1.99 billion from investors including Goldman Sachs Group Inc. BC Partners is making the purchase together with Canada Pension Plan Investment Board and a management team led by Suddenlink Chief Executive Officer Jerry Kent, according to a statement from Cequel Communications Holdings LLC, which does business as Suddenlink. Including debt, the deal has an enterprise value of $6.6 billion, Cequel said. Suddenlink is the seventh-largest cable system operator in the U.S., the company said. In the 12 months ending March 31, the company generated $1.96 billion in revenue and $743 million in adjusted earnings before interest, taxes, depreciation and amortization. Suddenlink offers television, high-speed Internet and telephone services to more than 1.4 million residential and commercial customers, primarily in Texas, Oklahoma, Arkansas, Louisiana, North Carolina and West Virginia. Reuters, Bloomberg, Montreal Gazette
Broadband providers are doing a better job of delivering to homes the Internet connection speeds they advertise, a new federal report says. In the Federal Communications Commission's second annual "Measuring Broadband America" report, to be released today, the agency found that Internet service providers (ISPs), on average, delivered 96% of their advertised download speeds during peak hours, defined as 7 p.m. to 11 p.m. local time. That's up from 87% for download speeds in the first report last year. ISPs delivered 107% of advertised upload speeds, up from 103% last year.
All types of home broadband delivery technology - cable, DSL and fiber optic - showed improved performance. Fiber led the way by delivering, on average, 117% of the advertised speed in prime time, up from 114% in 2011. Cable improved to 99%, up from 93%. DSL rose to 84% from 82%. Not only were ISPs providing more consistent, faster broadband service, but consumers were opting for pricier, faster connections. The average consumer in the survey of about 6,200 U.S. homes increased their service to an average download speed of 14.3 megabits per second (Mbps), up 30% from last year.
The improved broadband performance "is good news for consumers and the economy, but we need to keep pushing for faster broadband speeds and greater capacity," said FCC Chairman Julius Genachowski. "Bandwidth abundance is essential to driving innovation and unleashing the benefits of broadband, including increased education, health care and job-creation opportunities." In addition to overall improvement, the report found a narrowing of the gap between worst- and best-performing ISPs. Better connectivity is part of the FCC's National Broadband Plan to stimulate the economy. Its goal is at least 100 million homes with affordable access to download speeds of at least 50 Mbps by 2015.
Despite the improvements, "The Cost of Connectivity," a separate new report from non-partisan research group the New American Foundation, finds that U.S. consumers typically pay more for slower broadband than people in other world cities. Hong Kong residents pay about $35 a month for 500 Mbps service, while people in New York and Washington pay a similar bill for broadband typically 20 times slower. Regulators may need to find ways to stimulate competition, says Benjamin Lennett of the group's Open Technology Institute. "All the applications that could be extremely beneficial are lost if we are still operating at 10 to 15 years behind what other countries and cities have available." USA Today
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