CNSL

Consolidated Communications Holdings, Inc. (CNSL)

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Consolidated Communications Holdings Inc. (CNSL)

Citi 2013 Internet, Media and Technology Conference Transcript

January 8, 2013 2:15 PM ET

Executives

Steve Childers - Chief Financial Officer

Analysts

Mike Rollins - Citi

Presentation

Mike Rollins - Citi

… are available at the registration desk. Well, good morning to those joining us via the webcast. I’m Mike Rollins, Telecom Analyst at Citi. Our next fireside chat, we’ll take a deeper dive back into the wireline sector with Consolidated Communications. I’d like to welcome back Steve Childers, Chief Financial Officer of Consolidated Communications. Thanks for joining us today.

Steve Childers

Thanks, Michael. I really appreciate the opportunity to be here today.

Mike Rollins - Citi

Great. Well, Steve, maybe just to get us kicked off, you had very busy 2012 in a number of respects. Maybe to discuss you enter into 2013 what are your strategic and operating priorities are?

Steve Childers

Sure. I would be happy to do that. I guess, before I jump into 2013, as you said, we had a very busy 2012. We think we had an amazing year maybe just kind of do a highly level review of that before we jump into 2013.

First of all, we think we produced consistent -- very consistent results compared to the peer group throughout the year. We also did major acquisition which we close on July 2, 2012 with SureWest Communications.

We think that transaction really positions us very well for the future in terms of revenue growth, diversification of our revenue base and future cash flows. We are very -- and we are off to a great start on integration and synergies. I’m sure it’s going to be another question here in a second.

We also did refinancing at the -- during the fourth quarter of this year that extended our 2014 maturities out to again the 2017. So the net result of that as we have no current debt maturities until for five years -- until very end of 2017. We are very pleased with the overall transaction -- refinancing transaction there.

And we also end of the fourth quarter we have for those who might be new to the story. We have investments with five partnership interest with Verizon wireless. We were able to actually increase our ownership interest in one of those partnerships and increase in future cash flows from those partnerships and we are very pleased with that.

And the last thing is I think position as well for 2013 as part of the SureWest transaction. We also have $75 million in net operating losses that were part of that transaction. So going, looking forward to 2013 and probably 2014, which really going to have really diminish amount of cash taxes that we’ll be paying over the course of the next couple years.

So, with that background, we really think we are well-positioned going into 2013 and we really kind of so -- again based on results we had over a couple of years especially 2012, we really see 2013 being very consistent play book.

We are going to continue to focus on growing topline revenue particularly the assets from SureWest, really going to be focus on the broadband and business side of the business, and we are also, number two, we really be focus on SureWest, the synergy numbers in making sure we have the seamless integration. Again, we’ll talk -- hopefully we’ll talk a little bit more about that in a minute.

And then third, we just -- like we always do, we have maintained the focus to have the most competitive advanced serve products and services and the best service in all the market areas that we serve with the thought being if we do all the right things in terms of taking care of the business, taking care of our customers will put us in a position to continue to deliver and improve the payout ratio relative to the dividend.

Mike Rollins - Citi

Great. Thanks. And let’s talk a little bit more about the SureWest integration process?

Steve Childers

Sure.

Mike Rollins - Citi

Maybe to talk about steps that you’ve gone through, what’s next and how the things that have incremental synergy realization for 2013?

Steve Childers

Okay. Well, just to set back, the guidance that we’ve given or the outlook that we’ve given for our synergy target with SureWest is $25 million over the first two years from closing. We think we’ve come out of gate very quickly on that. We are off to a fast start. We know have $10 million basically at close of the transaction, another $2 million in the third quarter.

And again, that’s putting the cut start and put the companies together, difficulties -- removing difficult headcount, got some big savings as a result of management team going away.

So the rest is really going to be base on how we put the companies together from an integration perspective and based on all the hard work that our employees have done on both legacy SureWest and legacy Consolidated, and even starting before the closing of a transaction.

We have three major milestones in the fourth quarter. Basically Kansas City and California which were the properties that we acquired with SureWest, they were able to get on the common billing platform for SureWest.

We’ve also now have made the decision on what the billing platform for Consolidated is going to look like going forward, sort of the hybrid of, what we -- what legacy CCI was doing compared to what SureWest is implementing, that will probably take another year to get that fully behind us. We can go faster but we want to make sure we do it right and don’t cause any customer issues or revenue leakage.

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