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Otelco is primed to buy peers

by Chris Nolter  |  Published February 9, 2012 at 12:41 PM
Rural telecom Otelco Inc. is a candidate to acquire peers, according to a recent analyst note.

Raymond James & Associates Inc. analyst Frank Louthan wrote Wednesday, Feb. 9, that the Federal Communications Commission's recent changes in subsidies to rural carriers could motivate the telecom.

"We believe Otelco will benefit as a natural consolidator for smaller rural local exchange carriers (RLECs), now that the FCC has issued the much needed reform to the legacy Universal Service Fund," Louthan wrote. The analyst pointed to Otelco's $4.5 million purchase of Shoreham Telephone Co. in 2011 as an example. Shoreham was an incumbent carrier in Vermont that has developed networks outside of its traditional territory to challenge other carriers.

Louthan also suggested that Otelco, with a 14.1% dividend yield, is undervalued.

Shares of the Oneanta, Alabama, telecom gained more than 9% on Wednesday, and on Tuesday traded up 29 cents, or 2.2%, to $13.27.

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Tags: FCC | Federal Communications Commission | Frank Louthan | Otelco Inc. | Raymond James & Associates Inc. | RLEC | rural local exchange carriers | Shoreham Telephone Co. | Universal Service Fund

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