SureWest to sell Kansas City, Sacramento operations to Consolidated Communications

Less than two weeks after an analyst predicted that Google (Nasdaq: GOOG) could buy cable overbuilder SureWest (Nasdaq: SURW) to jumpstart its tests of a 1-gig broadband network in Kansas City, Consolidated Communications said Monday that it would buy SureWest for about $341 million in cash and stock.

The deal gives Consolidated, a rural telco and IPTV provider with operations in Illinois, Pennsylvania and Texas, SureWest systems counting 130,000 residential subscribers and 15,700 commercial customers in the Kansas City and Sacramento regions.

Mattoon, Ill.-based Consolidated markets a triple-play of IPTV, DSL and telephone service. It counted just 32,981 IPTV customers at the end of the third quarter, and its video service was available to more than 211,000 homes, according to its earnings report.

SureWest competes with Time Warner Cable (NYSE: TWC) in Kansas City, and Comcast (Nasdaq: CMCSA) and AT&T's (NYSE: T) U-verse TV in the Sacramento area. Last month, Drexel Hamilton analyst Barry Shine speculated in a research note that Google could buy SureWest. "We see two potential positives for SureWest. It could either be acquired by Google, as Google did with Motorola Mobility (NYSE: MMI), or it could become a tenant on Google's network using it as an inexpensive way to significantly expand its footprint," Shine said.

Consolidated didn't say how many employees from the combined company may cut after the deal closes, but noted that the transaction will generate $25 million in "operating synergies" and $5 million to $10 million in "capital expenditure synergies." CEO Bob Currey is scheduled to brief analysts on the deal during a conference call late Monday morning.

"SureWest has built one of the highest quality networks in the industry and transformed itself into a leading broadband provider. The combined company will create a broader platform from which to expand our products and services to meet the demands of our customers," Currey said in a prepared statement.

For more:
- see the news release

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