The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas yesterday unveiled its third Florida acquisition within three months via its $24 million purchase of a Caribbean Crossings “mirror image”.

The deal to buy US Metropolitan Telecom, the provider of a fibre optic ring that connects northern and central Florida, is both an attempt to give the BISX-listed communications provider instant critical mass and build a business model similar to the one it has developed in the Bahamas.

While its previously announced $65 million acquisitions of Marco Island Cable/NU Vu and Summit Broadband give Cable Bahamas providers of cable TV, broadband Internet and phone services, US Metropolitan Telecom will provide it with the necessary telecommunications infrastructure in Florida - the same role as its wholly-owned Caribbean Crossings subsidiary performs in the Bahamas.

Anthony Butler, Cable Bahamas president and chief executive, told Tribune Business of the latest deal: “It’s a fantastic opportunity. They are the mirror image of Caribbean Crossings. It’s the same model we’re building off in the Bahamas.

“They’re [US Metropolitan Telecom] the providers of the metro fibre ring that they have built out all over Florida. It’s similar to the Bahamas, so they two are going to be connected.”

Mr Butler explained that US Metropolitan Telecom’s fibre optic ring runs from Miami all the way across to the Florida west coast, then tracks north to the Orlando area, and back down to Miami again.

Tribune Business understands that US Metropolitan Telecom already carries communications traffic for Marco Island Cable/NU Vu and Summit Broadband. It will perform the communications infrastructure role that Caribbean Crossings does in the Bahamas, with the other two entities acting as the cable TV, Internet and phone providers.

Mr Butler said US Metropolitan Telecom’s fibre optic ring covers 18 million consumers, and added: “There’s fantastic opportunities for small guys up there [in Florida].”

Other clients whom US Metropolitan Telecom carries traffic for include AT&T and Verizon.

The US Metropolitan Telecom deal, as well as those for Summit Broadband and Marco Island Cable/Nu Vu, are still subject to regulatory approvals in both the US and the Bahamas.

‘Fast track’ approval for the Summit Broadband purchase has already been obtained from the Federal Communications Commission (FCC), and the same will now be required for the US Metropolitan Telecom purchase.

All three acquisitions will also need exchange control approval from the Central Bank of the Bahamas, meaning really the Cabinet - in the form of the National Economic Council (NEC) or Investments Board.

The US Metropolitan Telecom acquisition will take Cable Bahamas’ total US buying spree to $89 million, with the latest deal set to be financed from the company’s existing credit facilities, having been approved by the Board on the advice of a special investments committee.

Yet, with some $103.563 million in bank debt and preference shares on its balance sheet, some shareholders are questioning what the impact from adding another $89 million will be.

Cable Bahamas is set to divulge more details on the three acquisitions once the regulatory approvals process gets more advanced, but one shareholder yesterday urged the company to be more transparent.

The investor, speaking on condition of anonymity, told Tribune Business: “We’re trying to figure out why this [US expansion] is a good idea, and they’re not telling you why. Maybe they’ll tell you when the deal is done.”

Questioning why Cable Bahamas was not focusing on winning the bid for a second cellular licence when that market is liberalised in 2013, the shareholder said: “Operating on the outside it seems to me a very risky strategy for a number of reasons.

“First of all, unless they show otherwise, I would think that south Florida is a much more competitive market than the Bahamas, so yields are going to be much, much lower.

‘To be successful in the US, you need tonnes of volume. It’s an expensive strategy because you need to get critical mass, and this is probably why they are trying to buy - to develop critical mass. But you need to spend a whole heap of money.”

The investor added: “I admire the fact they’ve got the balls to do it and explore such a competitive market.

“Maybe this is the only way for them to grow. They’ve picked all the low hanging fruit, and now they have to go higher up the tree.”

Announcing that US Metropolitan Telecom would be acquired via Summit Vista, Cable Bahamas’ wholly-owned Florida subsidiary, Mr Butler added in a statement: “This acquisition dovetails nicely, and is an integral part of the proposed Florida expansion announced just over six weeks ago as these acquisitions are mutually dependent for this strategic expansion.

“US Metro’s extensive fibre optic network will extend the reach of Cable Bahamas’ existing fibre network from Miami to the west coast of Florida, connecting Marco Island and NuVu’s network and then continuing north through and combining Summit Broadband’s fibre rich network in Orlando, then aggregating back to Cable Bahamas’ central office in Boca Raton, Florida.”

He added: “US Metro was the first alternative telecommunications company in southwest Florida providing competitive services using a 100 per cent fibre optic cable network against the incumbent phone company.

“US Metro provides world-class Internet, data and voice communications services to southwest Florida businesses and to national telecom carriers.”