Knology tuning up Sunflower acquisition
Knology is in the process of integrating its operations with Sunflower Broadband, which it purchased for $165 million earlier this year, and the checklist includes connectivity between systems, a unified back office and eliminating redundant jobs.
Knology's deal to buy Sunflower Broadband closed in October, but the integration work started prior to the closing.
With Sunflower, Knology added 54,000 homes passed and 105,000 revenue-generating units (RGUs) in the Eudora and Lawrence area of Douglas County in Kansas. Prior to the deal, Knology had about 700,000 residential triple play customers in Florida, South Dakota, Georgia, South Carolina, Alabama and Tennessee.
Knology has been working on organic growth through its "fill-in, edge-out" strategy and has previously said that the Sunflower deal made geographical sense for the West Point, Ga.-based over-builder.
"The initial months are being spent more on the interconnectivity between the companies and making sure that our common systems are in place so that we can use them for the trouble ticketing process, identifying outages and monitoring the network," said Tony Palermo, Knology's vice president of marketing. "So mostly back office stuff with all of the daily routines that we need to be on one system for."
Palermo said that Knology and Sunflower share a similar HFC architecture, but engineers are working on Internet traffic routes between the systems.
"That whole backbone infrastructure gets very interesting with topology, the routing of data, having multiple routes and backup," he said. "Our engineers have been working on this master plan for some time. The pieces of the puzzle are fitting in nicely with having this location close to Kansas City and having that just due south of our South Dakota properties."
Along with an increase in revenues – Sunflower is expected to generate approximately $51 million in revenue and $22 million in EBITDA this year – and the opportunities to fill in more spots on its organic growth strategy, Knology also benefits from the pioneering work Sunflower has done to date. Sunflower Broadband has been an innovator within the cable industry, with early launches of a whole-home DVR solution with Pace, DOCSIS 3.0 tiers and advanced VOD advertising.
"Their whole area of VOD, and how they do post- and pre-advertising," Palermo replied when asked what Sunflower technologies Knology was most interested in. "They also have a TV station that has a very highly rated news program in the area, so we'll look at ways to leverage the functionality of TV stations across other markets if that makes sense.
"They've done a wonderful job with the engineering and the adoption of new, leading-edge technologies. They're ahead on the whole full digital deployment, they have a very robust HD channel component and it's very well run."
On the flipside, Palermo said Knology has a "very robust" Web portal, which is provisioned through Synacor.
"We'll be able to turn on the Knology portal to give their customers access to a Yahoo- or AOL-like front end to their e-mail or other services," he said.
On the employee front, Sunflower has roughly 200 employees in the Lawrence, Eudora and Douglas counties area. Palermo said Knology has been actively meeting with Sunflower employees to keep them apprised. Some redundant jobs in accounting and call centers will be cut over the next three to 12 months, but Palermo didn't provide a specific number.
"The dynamics are many when you look at it over a 12-month period, but we're very committed to having a strong local presence in all of our groups," Palermo said. "Everyone whose job is going to be relocated, repositioned or absorbed into the company has been communicated with.
"In the course of three to 12 months, we're going to have some people apply for jobs at other Knology locations. We have 80 jobs open, and some people may leave their Lawrence position, and then maybe other people whose job was eliminated can apply for those positions. What we're trying to do is make sure everything gets realigned and is very clean so that the cable operation is an entity, the TV station is an entity and everything that goes back to World Corp. is their entity."