Competition consolidates in Texas
The market for competitive cable and broadband services is heating up in Texas, with the recent news that competitive providers Grande Communications and ClearSource will combine under the Grande name.
Grande, which is building a high-speed broadband network in the Central Texas corridor including the markets of Austin, San Antonio and San Marcos, will add a total of 12 ClearSource franchises, including Waco, Corpus Christi, Midland and Odessa. The agreement is still to be finalized following regulator and shareholder approvals.
This isn't exactly two disparate companies joining forces … at the center of the merged company is Grande Vice Chairman and CEO William Morrow, who has ties to the founding of the former ClearSource. In a previous position with competitive cabler Knology, Morrow brought together Knology investors to create ClearSource, and served as a founding executive and board member of the new company. In 1999, Morrow left Knology to start another company-present day Grande Communications.
The ClearSource connection goes a step further. In the process of starting Grande, Morrow purchased a company called Thrifty Call, which eventually became ClearSource's full-service telephony provider. So, connections between the two companies run relatively deep.
In the new combined company, 77 percent of the ownership of ClearSource will own 52 percent of the ownership of Grande, according to Morrow. He adds that the merged company will have a quarter of a million homes passed and roughly 100,000 connections.
"Grande is a fully-funded EBITDA-positive company, and ClearSource's markets of Waco, Corpus (Christi), and Midland/Odessa are all EBITDA-positive markets," Morrow says. "When we combine these two companies, it's an accretive transaction, and the combined company is even stronger from a fully-funded perspective."
He adds: "This new combined company will have about $450 million of equity contributed, and Grande has a $70 million debt facility of which we've barely drawn from, so you're looking at a company-unlike a lot of folks in telecom-that is very well-positioned for the future and has very limited debt."