CenturyTel enters new markets with Madison River acquisition

Monroe, Louis.-based CenturyTel announced its intent today to acquired Madison River Communications for $830 million. The deal would add 176,000 access lines throughout Alabama, Georgia, Illinois and North Carolina.

The all-cash deal also would secure a broadband focused company with 99% broadband coverage in is territories and a 30% Internet service penetration rate. CenturyTel’s access lines across its 25-state market would swell by 8%. With this acquisition, CenturyTel will have approximately 2.3 million access lines and 390,000 high-speed Internet subscribers. CenturyTel also will assume the debt of Madison River.

“Madison River’s assets are very attractive and should be relatively easy for CenturyTel to absorb,” said Glen Post, chairman and CEO of CenturyTel. “Their lines are located in attractive markets and exhibit many of the demographic qualities we look for, including high household income and economic growth.”

Post said Madison River’s markets are somewhat more urban that CenturyTel’s, “But I think they are well positioned to defend their markets particularly with their 30% high -peed Internet penetration levels,” he said.

The company expects the acquisition to be accretive to free cash flow per-share in the first year, not including operational synergies it expects to exploit to the tune of $17 million annually.

The acquisition is expected to close in the second quarter of 2007. CenturyTel intends to finance the acquisition with debt and cash generated from operations. It also expects to complete the remainder of its current $1 billion share repurchase program by mid-year 2007.

CenturyTel will pick up Madison River's 2,400 route-mile fiber network, which Post said complements and connects CenturyTel’s existing operations.

“These are markets to seriously consider for IPTV expansion, and that’s something we will be considering in the weeks ahead,” Post said. He added that he doesn’t foresee an immediate need for major network investment requirements.

Madison River generated $189 million of revenue, $99 million of EBITDA and $35 million of leveraged free cash flow, before anticipated synergies, in the twelve months ended September 30, 2006. CenturyTel estimates the transaction will be approximately 4% accretive to free cash flow per share, before synergies. After synergies, the transaction is estimated to be approximately 6% accretive to free cash flow per share.

Lehman Brothers was the exclusive financial advisor to CenturyTel on the transaction. Goldman Sachs & Co. and Merrill Lynch & Co. acted as financial advisors to Madison River.