We were mildly perplexed by the sale this week of much of the fiber in Chicago owned by WideOpenWest (WoW), to Verizon for $225 million in cash. It will get a further $50 million to complete the network build. It turns out that what we have been saying for the past 5 years, that cellular businesses are screwed without fixed line backhaul, is true, and Verizon said that the network, when completed in late 2018, will provide backhaul for 500 macro-cell wireless sites and 500 small-cell wireless sites.
WoW said it will continue to focus on residential services through edge-out builds. The deal will close by early in Q1 2018 and much of the proceeds will go to pay down part of its $2.74 billion in debt. WoW will lose the opportunity to book around $13.2 million to $13.7 million in EBITDA in the current financial year.
WoW has been building out fiber in Chicago since 2014 and has constructed 1,200 miles of fiber which it has always said was for a leading wireless carrier.
WoW had revenues of $300 million in the last published Q1 results and its Q2 is out in a few weeks. Revenue was down less than 1% and net income was considerably stronger than in recent quarters at $31.9 million. This quarter included interest expense of almost $46 million. WoW went public in March of 2017 raising some $400 million and its revenue has been static at around $1.2 billion annually for the past 3 years.
It bills itself as the sixth largest cable operator in the US when ranked by number of customers, providing high speed data, video and telephony to 3.1 million homes and businesses in Alabama, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Ohio, South Carolina and Tennessee.