SureWest to acquire Everest Broadband

DECEMBER 7, 2007 -- Independent communications holding company SureWest Communications (search for SureWest) has signed a definitive agreement to acquire Everest Broadband Inc., a portfolio company of Seaport Capital, for $173 million in cash. 

Everest is a privately held competitive provider of high-speed data, video, and voice services in the greater Kansas City area. The transaction, which is expected to close by the end of the first quarter 2008, will more than double SureWest's triple-play residential subscriber base and facilitate the rapid expansion of its business services, say SureWest representatives. 

SureWest says it has been successfully transforming itself from a traditional provider of voice products to a full-service integrated communications company. The company believes this transaction significantly advances its strategic transformation by bringing together two companies focused on delivering advanced services to a knowledgeable customer demographic that has historically demanded superior triple-play products. 

The combined company will serve a broader customer base across two comparable areas and together possess over 200,000 revenue generating units (RGUs) in the greater Sacramento, CA; Johnson County, KS; and Kansas City, MO, areas. This includes approximately 95,000 data; 54,000 video; and 53,000 voice RGUs in addition to roughly 117,000 voice access lines. 

As a customer service and bandwidth leader reporting 2.7 RGUs per residential customer and an acceptance rate of more than 75% on triple-play services, Everest provides the opportunity to increase SureWest's average revenue per user (ARPU) and its sale of multiple services to an expanded and more diversified customer base, claims SureWest. The carrier says it intends to grow the number of total marketable homes and increase penetration on the Everest network while leveraging Everest's fiber ring to provide services to a greater number of business customers in the area. 

For the third quarter ended September 30, 2007, the combined company generated $66.5 million in unadjusted revenue and approximately $21 million of unadjusted EBITDA. The combined results exclude any pro forma adjustments necessary to reflect the purchase transaction.

"Over the past two years, we have made great strides in transforming SureWest into a premier triple-play provider that delivers a superior customer experience," contends Steve Oldham, president and chief executive officer of SureWest. "The Everest transaction significantly accelerates our growth and geographic diversification strategy by adding Everest's rapidly expanding customer base in the greater Kansas City area to our northern California service territory. Everest's advanced infrastructure has made it a leading-edge communications provider boasting superior network bandwidth capabilities in the area it serves," he continues. "We believe we can successfully leverage our industry-leading experience in building and operating networks to provide superior service to new and existing business and residential customers, which, in turn, will improve long-term shareholder return."

"SureWest and Everest share very similar customer demographics, and we look forward to continuing to bring best-in-class products and reliability to our service area and beyond," adds Phil Spencer, president and CEO of Everest. "Our residential and business customers will continue to be well-served with 5-star service by the combined company."

SureWest claims to have one of the most advanced and reliable networks in the nation, delivering 100 Mbits/sec to each of its fiber customers and offering the fastest symmetrical Internet speed in the country at up to 50 Mbits/sec. It continues to upgrade and expand its IP-based fiber-to-the-home (FTTH) network to offer a truly superior customer experience, say company representatives. SureWest has also effectively leveraged its extensive network bandwidth to become the first provider of HD IPTV in the country and says it will deliver 50 HDTV channels before the end of 2007. 

In order to enhance its financial flexibility to support its continued growth, SureWest has sold non-core assets, including the directory advertising business earlier this year. In addition, the company is currently in negotiations to sell its wireless business, although there are no assurances that this transaction will be consummated.
SureWest says it plans to finance the transaction through a combination of cash on hand and committed debt financing from CoBank, ACB.

The combined company's capital expenditures over the next two to three years will include additional build-out in the greater Sacramento and Kansas City areas, as well as the targeted network build associated with increased penetration and ARPU on the existing networks.

The transaction, which is expected to close by the end of the first quarter 2008, is subject to customary closing conditions and regulatory approvals, including approval by the Federal Communications Commission and the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

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