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ONEONTA, Ala., Sept. 19, 2018 (GLOBE NEWSWIRE) -- Otelco Inc. (Nasdaq: OTEL), a wireline telecommunication services provider in Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont and West Virginia, announced today that it has been awarded funding from the FCC’s CAF II auction for services in Western Massachusetts and is further reducing its leverage through voluntary prepayments on its CoBank debt.
CONNECT AMERICA FUND II (CAF II)
During August 2018, the FCC employed a reverse auction to award additional Connect America Fund support for providing improved broadband service in rural areas. The Company is completing the post-auction requirements to receive just over $0.9 million for three contiguous locations in Western Massachusetts during the ten-year funding period. These CAF II awards support the construction of a fixed wireless network that will deliver services to four targeted communities. Network deployment is expected to begin in fourth quarter 2018, once FCC requirements, operational agreements and regulatory approval have been completed.
“The FCC’s CAF II funding continues the focus of bringing enhanced digital services to rural America,” commented Rob Souza, President and CEO of Otelco. “When FCC Chairman Ajit Pai visited our New Gloucester, Maine, office last week, we had an opportunity to provide him with a first-hand view of how Otelco is deploying ACAM and CAF funding in furthering the FCC’s goals. With improved broadband availability and speeds, our rural customer base can bridge the digital divide from both a business and personal perspective.”
Otelco indicated in its second quarter 2018 earnings announcement that it planned to make another voluntary prepayment on its debt held by CoBank, ACB, as Administrative Agent, Issuing Lender and Swing Line Lender. On July 31, 2018, and August 31, 2018, the Company made $1.0 million and $2.0 million voluntary prepayments, respectively, lowering the outstanding loan balance to $77.7 million. At current interest rates, the additional payments will reduce annual interest cost by just under $0.2 million. No fees or penalties were associated with the prepayment, and the Company has the option to offset its 2018 excess cash flow payment due in March 2019 by the prepayment amount. The next quarterly principal payment of $1.1 million is scheduled for September 28, 2018. The CoBank agreement also provides for a reduction in the interest rate margin on the loan from 4.50% to 4.25% once the Company lowers its Leverage Ratio below 3.0, which it expects to do at the end of third quarter. This would represent an additional savings in interest expense of approximately $0.2 million per year.
“It’s exciting to find new avenues to expand our service offerings and improve the level of service available in rural communities,” continued Souza. “We expect to increase our capital investment in our business to approximately $9.0 million in 2019 and 2020, as we accelerate the deployment of fiber in our territories. Our shareowners also benefit from the continued reduction in leverage as we use available cash to accelerate the repayment of our debt.”
Otelco Inc. provides wireline telecommunications services in Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont and West Virginia. The Company’s services include local and long distance telephone, digital high-speed data lines, transport services, network access, cable television and other related services. Otelco is among the top 20 largest local exchange carriers in the United States. Otelco operates eleven incumbent telephone companies serving rural markets, or rural local exchange carriers. It also provides competitive retail and wholesale communications services and technology consulting, managed services and private/hybrid cloud hosting services through several subsidiaries. For more information, visit the Company’s website at www.Otelco.com.
FORWARD LOOKING STATEMENTS
Statements in this press release that are not statements of historical or current fact constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties, and other unknown factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms “believes,” “belief,” “expects,” “intends,” “anticipates,” “plans,” or similar terms to be uncertain and forward-looking. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Chief Financial Officer