Buying FairPoint May Benefit Consolidated, Analysts Say; Acquirer Also Sold IT Unit
Consolidated Communications may benefit from its $1.5 billion buy of FairPoint Communications (see 1612050030), even though the acquiree has struggled, analysts wrote Monday after the deal was disclosed, and Tuesday, as the acquiring telco announced it sold its IT business.…
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"The transaction is positive for Consolidated because it will result in a modest decrease in leverage, increased scale and the potential for growth through greater investment into the legacy FairPoint properties," Moody's debt-rating analysts wrote. "FairPoint's revenues have faced pressure as growth in data and internet services has not been enough to offset the decline in voice and access revenues." The deal boosts "exposure to legacy telecom revenue including consumer voice, [but] we believe the deal will be accretive" and cut leverage, "outweighing the increased revenue headwinds," wrote Raymond James' Frank Louthan. He upped his rating on Consolidated from underperform to market perform. Separately, Consolidated said it completed the sale of its enterprise services equipment and IT services business to ePlus Technology. That now-divested unit had $55 million in FY 2015 revenue, said Consolidated.