Surewest on the hunt for M&A

Surewest Communications is actively seeking acquisitions to help scale its fiber-to-the-home (FTTH) business, the company said today, emphasizing that it is not looking only for properties in geographic proximity to its California network.

“While there may be some advantages to acquiring assets close to Sacramento, our interest is in the asset,” said Steve Oldham, Surewest’s chief executive officer. “We believe our business model can be replicated elsewhere. It doesn’t require the networks to be physically integrated.”

Surewest has recently been combating record levels of access line loss, which the company said peaked and then “tapered off” in the third quarter. Total access lines were down nearly 5% from a year earlier to less than 140,000 in the third quarter, and what the company calls “telecom” lines—which include business lines and non-fiber-based residential lines—were down 7.5% to less than 117,000.

Surewest blamed the line loss acceleration on competition as well as wireless and broadband substitution. The number of its own wireless subscribers also sank 3% to less than 51,000 in the quarter.

Meanwhile, the company’s DSL and FTTH subscribers were up 10% and 20%, respectively, from a year earlier, giving the company more than 63,000 broadband subscribers. Voice, video and data subscriptions were up 12%, 8% and 15%, respectively.

The company’s broadband growth wasn’t enough to overcome access line losses, thus fueling the company’s desire to grow through acquisition. Its total income from operations dropped 9% from a year earlier to $736,000 in the third quarter.

Surewest expects a boost this holiday season as it makes high-definition digital video recorders available. The lack of an HD DVR offering “has clearly hampered our [video] sales,” said Fred Arcuri, Surewest’s chief operating officer.

Which companies Surewest may look to acquire is anyone’s guess. Some might point to Eagle Broadband, a financially struggling firm with an IPTV superheadend in Miami; or to Optical Entertainment Network, whose Texas FTTH network was built using assets acquired from Eagle.