RCN Corp. Monday acquired 21st Century Telecom Group,
Inc. for approximately $500 million.
By acquiring Chicago’s only single-source, facilities-based provider of
bundled telecommunications services, RCN (RCNC)
moves into a high-density major metropolitan market with 3.1 million homes. RCN will offer a variety of phone, cable and high-speed Internet services.
David C. McCourt, RCN chairman and chief executive officer, said deal
continues to build on the momentum of their expansion plans.
“The acquisition of a young, dynamic company like 21st Century accelerates
RCN’s business plan, McCourt said. “It also allows us to move outside our
original target markets to enter the nation’s third largest metropolitan
area,” he added.
The addition of Chicago allows RCN to leverage 21st Century’s operating and
network expertise and provide access to the Chicago Transit Authority’s
right-of-way. With regulatory approvals and rights of way secured, 21st
Century has built nearly 250 miles of fiber along Chicago’s lakefront from
Evanston to the Hyde Park area, including the “Gold Coast.”
McCourt said Chicago was the place to be for RCN to maximize telecom
traffic profits from minimal real estate purchases.
“The addition of this market expands our coverage to nearly 42 million
homes in an area that generates 44 percent of the nation’s telecom traffic
in only 6 percent of its geography,” McCourt said.
“This increases our revenue
potential and creates value for our shareholders.”
In October, Paul G. Allen-led Vulcan
Ventures, Inc. infused RCN’s coffers with a $1.65 billion investment to
fund RCN’s network expansion.
McCourt said that the 21st Century deal is part of their aggressive
expansion plan.
“This is the latest example of how our newly raised capital will be used
efficiently to continue our aggressive growth,” McCourt said.
Robert J. Currey, 21st Century president and chief executive officer, said
the acquisition was a great opportunity for 21st Century because RCN’s
corporate objectives and operating philosophy are similar to theirs.
“We were the first competitor to challenge the incumbents in Chicago and
plan to be a major player in the metropolitan area,” Currey said. “We
remain committed to providing our 37,000 customers with high quality
services at competitive prices.”
“With the additional resources of RCN, we look forward to offering new and
innovative products in the future to our growing customer base,” Currey added.
The closing of the transaction is subject to the consent to remove certain
covenants from 21st Century’s Senior Discount Notes and Exchangeable
Preferred Stock and also subject to customary regulatory approval.
McCourt said the deal opportunistically replicates a proven residential
business model.
“We can sell all of our services over one network and still have 85 percent
excess capacity left over for future services,” McCourt said. “Our new
network has lower operating costs than other companies seeking to offer a
bundle over older, existing networks originally designed to provide one
service. Retrofitting old networks by adding on electronics only increases
operating costs.”
21st Century’s network passes more than 200,000 homes and nearly 600
buildings that are connected to its network facilities. In addition, the
company has secured access to over 300 more urban buildings.
Currey will remain president and chief executive officer of 21st Century,
as well as assume additional responsibilities at RCN Corporation. His first
task will be to seamlessly integrate the companies’ operations and educate
employees and customers about the RCN br
and.
McCourt said Currey’s leadership is imperative to a smooth transition of
services.
“Bob Currey has assembled a talented group of professionals at 21st Century
and we are delighted to have them join the RCN team,” McCourt said. “Under
Bob’s leadership, this group will continue to aggressively build the
network and lead the organization through the integration process.”
