AT&T going strong, buys rural wireless co. Centennial
Smaller rural wired and wireless phone companies are going by the wayside quickly these days. AT&T has agreed to acquire Centennial wireless for $944 million to expand its coverage in Puerto Rico and several rural areas in the Midwest and beyond.
Yahoo News is reporting that the two companies have agreed to financing terms and the deal should be completed quickly. The deal comes amid a wave of mergers in the rural telecoms industry, which is struggling with slower wireless growth and declining home phone lines in a weak economy. The big guns, such as AT&T and Verizon, seem to be gobbling them up quickly. Verizon recently announced intent on acquiring Alltel, another rural wireless provider, to expand its coverage in weak areas.
AT&T has agreed to pay Centennial shareholders $8.50 per share, which is more than double the company’s closing price of $3.84 on the Nasdaq on Friday. A year ago, Centennial was trading at around $10 which shows the steep decline the company was facing.
“I’m surprised to see a deal in this economic climate. But on the other hand, AT&T is using cash on hand and taking advantage of the significant decline in asset prices,” said Michael Nelson, a wireless analyst at Stanford Group.
Centennial is a rather small enterprise when compared to other small communications companies. The company has a small total of 1.1 million wireless subscribers. Of which, about 40 percent are in Puerto Rico, where it has a market penetration of about 11 percent. It also serves about 596,700 access lines for business customers in Puerto Rico. Beyond Puerto Rico, AT&T will gain rural coverage in the Southeast portion of the US, as well as the US Virgin Islands.
Sooner or later, they’ll only be a relatively small number of telecommunication companies that control the majority of subscribers in the US. With strong competition from cable companies and VOIP-based phone lines, LAN-Line providers are decreasing rapidly. Even Sprint, which at one point was a major player in wireless, has seen a steady decrease for a long time.
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