Conservative investors may rave over the stable cash flows rural telephone companies produce, but a spike in competition from wireless carriers and other rivals threatens to disenchant money managers.
Among rural providers’ biggest foes are wireless carriers fighting for customers and the right to subsidize their operations by dipping into the highly coveted Universal Service Fund.
In a January report, Precursor Group analyst Rudy Baca said new federal porting rules — requiring rural providers to transfer their customers’ phone numbers to other carriers if they defect — could destroy the barriers that have shielded the telcos serving rustic areas from stiff competition.
“Rural LNP is highly likely to have the more significant discontinuous change effect of breeching the regulatory barriers and LATA boundaries that have protected the rural markets from the effects of intense wireless competition and substitution,” Baca says.
Peter Saulnier, CFO at Morristown, N.J.- based Country Road Communications, says his company is prepared.
“We are operating as if competition is coming hard and fast,” he says. “Maybe we will be pleasantly surprised that it takes a while.”
