Private-equity firm TPG agreed to pay $1.6 billion for RCN Telecom Services L.L.C., a Princeton-based firm that provides cable and internet service in Delaware County and the Lehigh Valley.
In the deal, TPG will also acquire Grande Communications Networks L.L.C. for $650 million from private-equity firm Abry Partners L.L.C. to create a cable company that ranks in the top 10 in the United States, according to a statement Monday.
Google Capital, Alphabet Inc.'s investment fund, will acquire a minority stake in the companies, according to a representative, who declined to provide additional details.
Amid consolidation in the cable industry, private-equity firms have been quietly buying smaller operators, merging them and upgrading internet bandwidth and speed with the goal of injecting more competition into the market and, in some cases, attracting takeover interest.
With networks in Texas, New York, Boston, Chicago, and Washington, D.C., TPG could bring another super-fast internet provider to territories where AT&T Inc., Verizon Communications Inc., and even Google have service available or in the works.
On their own, cable's tiny mom-and-pops seldom become the deal targets of the likes of cable giants Comcast Corp. or Charter Communications Inc. Some serve sparsely populated corners of the country, while other "over-builders" such as RCN struggle to keep their TV businesses profitable as they compete against entrenched incumbents. Yet the game changes once they're rolled up. In an industry where consolidation or acquisitions are necessary for survival, a cobbled-together, regional cable system is one of the few options left - for both big and small providers.
TPG said RCN and Grande will challenge existing phone and cable operators by expanding gigabit-per-second, high-speed data services, and "focusing on providing high-quality and more reliable communications services along with better value and customer service."
RCN has about 289,000 video subscribers in markets including New York, Boston, and Philadelphia, while Grande serves 88,000 TV customers in Dallas and Austin, Texas, according to SNL Kagan. The company recently opened call centers in Wilkes-Barre and the Allentown area over the last five years, hiring 150 to 200 employees.
For Google Capital, the investment in the two companies gives the search-engine giant another toehold in the market for TV and broadband delivery. In addition to providing these services directly to consumers in some cities through Google Fiber, the Mountain View, Calif.-based company has been exploring various ways to get more involved in television, from YouTube programming to cable set-top boxes. Grande was actually the first cable provider to introduce a gigabit service in Austin after Google Fiber's push into the city. Google Capital, which specializes in later-stage investments, operates as a separate entity from Google Fiber.