Consolidated Communications (NASDAQ: CNSL) today announced plans to accelerate its fiber builds, following the results from the Rural Digital Opportunities Fund (RDOF) Auction. Specifically, Consolidated Communications will enable speeds of 1 gigabit per second to an additional 300k homes and small businesses in 2021.
Consolidated Communications’ RDOF Outcome
Consolidated Communications’ incremental capital expenditures for this fiber build will be partially offset by funding from the RDOF. Importantly, the Federal Communications Commission (FCC) created the RDOF initiative to replace its current Connect America Fund (CAF) Phase II program.
Indeed, Consolidated Communications secured $58.9m in funding over 10 years across 246 census block groups through the RDOF Auction. Specifically, these census blocks are located in Maine, Vermont, New Hampshire, Illinois, Texas, Florida, and Minnesota. Furthermore, the company will pass 200k locations as it builds to the 27k required RDOF locations, over a five-year period.
Additionally, Consolidated Communications will build to an additional 150k near-net passings in areas without RDOF funding. However, the company maintains that returns for this fiber build-out remain attractive. This is attributable to the proximity of its resources and fiber network.
Consolidated Communications Strategic Investment from Searchlight and Fiber Build Plan
This plan builds on Consolidated Communications’ early October 2020 announcement of the closing of stage one of Searchlight Capital’s investment. Through this earlier agreement with Searchlight, Consolidated Communications will, by 2025, upgrade a total of 1.6 million additional passings to fiber, offering speeds of 1 gigabit per second. Indeed, these 1.6 million passings represent over 70% coverage of the company’s service area.
Specifically, Consolidated Communications’ 1.6 million fiber passings build plan from 2021 to 2025 is as follows:
- 2021: 300k fiber passings
- 2022: 400k fiber passings
- 2023 to 2025: 900k fiber passings
Including Consolidated Communications’ current 378k fiber passings, which will be complete by the end of 2020, the company will have ~2 million fiber passings by the end of 2025. These network investments will be made across seven states, including more than 1 million passings within Northern New England.
Consolidated Communications Business Update
Consolidated Communications’ fiber network spans 46.3k fiber route miles and over 2 million fiber strand miles. In turn, this makes the company a top-10 fiber provider in the United States. The company offers solutions, including high-speed internet, data, phone, security, managed services, cloud services and wholesale / carrier solutions.
As part of Searchlight Capital’s investment, Consolidated Communications completed a refinancing and recapitalization of its balance sheet. Specifically, the company reduced its leverage to 3.5x EBITDA and secured a $250m revolver.
Consolidated Communications’ accelerated fiber network expansion will provide significant benefits to customers, especially rural consumers, and small businesses. Indeed, these fiber builds will equip customers to work from home, participate in online learning and consume entertainment, with significantly enhanced broadband services.