Cincinnati Bell announces two acquisitions worth $851 million
Regional telecom operator Cincinnati Bell is expanding its reach with two acquisitions that will boost its position in fiber infrastructure and cloud-related services: Honolulu-based Hawaiian Telcom, and enterprise IT company OnX Enterprise.
The two transactions will cost Cincinnati Bell approximately $851 million: about $650 million in cash stock and the assumption of debts for Hawaiian Telecom, and $201 million in cash for OnX. The two transactions are not contingent upon one another.
The “new Cincinnati Bell” is envisioned as having a revenue mix that is about half network-based and half IT-services-based: a scaled-up company that provides both fiber (including trans-Pacific undersea cabling that connects the U.S. with Asia) and cloud integration services. The current company earns about 35% of its revenues from its technology services unit, with 27% coming from its legacy entertainment and communications business and 38% from its “strategic” operations serving enterprises and other carriers. Cincinnati Bell expects that the two companies will boost its annual revenues from about $1.2 billion to about $2.2 billion.
According to a presentation accompanying the acquisition announcement, Cincinnati Bell sees the two purchases as a way to address a number of strategic issues: how to expand beyond its home base in Cincinnati and gain size and scale while “maintaining [a] relevant and comprehensive product portfolio” and “gaining traction with enterprise customers nationwide.” The company noted that the more fiber it has in an area, the greater its market penetration for entertainment and communications; additionally, it expects growth in communications to be “driven by [internet of things] and 5G infrastructure spend.” In terms of technology services, it sees its opportunity in the context that “89% of organizations are willing to pay a premium for cloud implementation and management services.”
“Our focus for the past several years has been investing in fiber,” Leigh Fox, Cincinnati Bell’s chief executive officer, told Bloomberg. “We have a dense local fiber network but we were only growing slowly outside Cincinnati. With Hawaii and OnX, we’re creating a national player.”
Cincinnati Bell said that Hawaiian Telcom has about 71% of the local market share in business voice and 46% in business data services, and that it sees “growth opportunity in commercial, [multi-dwelling unit], wireless densification/small cell and attractive fiber builds.”
Cincinnati Bell expects the OnX transaction to close in the beginning of this year’s fourth quarter. The Hawaiian Telcom transaction isn’t expected to be finalized until the second half of 2018. Hawaiian Telcom will have two representatives on the Cincinnati Bell board.