Iowa Telecom won't let up on M&A

Iowa Telecom is still on the hunt for more acquisitions as it works to integrate the assets of recent purchases, the company said today.

While reporting its fourth-quarter earnings – including 6% revenue growth attributable mainly to a recent acquisition – the telco said future acquisitions were one of four key focuses of the company going forward.

And acquisition opportunities abound in the telco’s backyard, as Iowa and Minnesota have some of the largest independent telco populations in the Midwest, if not the country. Iowa alone has about 150 independents, and Minnesota has about 70.

Iowa Telecom spent $125 million on two acquisitions in the second half of last year. Last summer, it acquired Bishop Communications, a small telco northwest of Minneapolis, for nearly $44 million ($33 million in cash and $13 million in assumed debt). And the week before Thanksgiving, it added Sherburne Tele Systems, a triple-play provider in the same area, for $80.6 million. (Sherburne is perhaps better known by its ILEC brand name, Connections Etc., and its CLEC brand name, NorthStar Access.) The two deals gave Iowa Telecom a solid foothold across its northern state border; in addition to a 66% stake in a 2500-mile fiber network there, Iowa Telecom now has a total customer base that is 15% outside of Iowa.

Though the company acknowledged that inhospitable credit markets have made M&A more difficult, they didn’t prevent the company from making last year’s purchases, one of which was made possible with help from the Rural Telephone Finance Cooperative, a nonprofit lender that typically funds network upgrades and acquisitions for its more than 500 rural telco members.

During this morning’s call, Iowa Telecom also said its nature as a rural telco has shielded it somewhat from the country’s larger economic woes and that its principal exposure to the agriculture sector – which has not been hit as hard as others – has helped stabilize the company’s business.

Iowa ended last year with nearly $12 million in cash and equivalents and more than $23 million in net income for the year.