On December 9th, High Point, NC-based North State Telecommunications Corp. announced that it has agreed to merge with a subsidiary of MTN Infrastructure TopCo, Inc., which together with its other subsidiaries does business as Segra. This seems to be a classic case of a small, family-owned business selling to a much larger enterprise. As usual, there is a financial story, a worker story, and a customer story.

The Financial Story: “We’re in the Money!”

Charlotte, NC-based Segra has agreed to pay $80 in cash per share for both North State’s Class A and Class B common stock, which represents a 31.1% (Class A) and 34.5% (Class B) increase over the closing prices as of December 6. This translates into an enterprise value of approximately $240 million.

In our view, to say that Segra paid a premium to acquire North State is a gross understatement. They vastly overpaid, which explains why North State’s Board of Directors unanimously approved the acquisition.

The Worker Story: “Layoffs vs. Loyalty”

While the notion that Segra severely overvalued and overpaid for North State is good — or make that, great — news for North State’s CEO and shareholders, it is unlikely to bode well for North State’s approximately 400 employees. It is hard to imagine that significant layoffs will not take place in the coming months. As noted by Investopedia.com: “Historically, mergers tend to contain job losses. Most of this is attributable to redundant operations and efforts to boost efficiency.”

At Carolina Digital Phone, we are NEVER happy to see anyone lose their job — regardless of whether they work for a competitor. We hope that those who are laid off get the support, training and opportunities they need and deserve. We also hope that North State employees who are not laid off survive the stress and “culture shock” of going from a business that has been family-owned for more than 100 years (North State was founded in 1895), to a much larger conglomerate with a multi-state footprint.

The irony is that North State would never have been coveted by Segra in the first place — let alone been massively overvalued — if it wasn’t for the hard work and dedication of workers; the very same people who will be getting pink slips in the future.

The Customer Story: “Frustration on the Horizon”

Just as worrisome is the likely impact this acquisition will have on North State’s customers in High Point, Thomasville, Archdale, Randleman, Jamestown, Trinity, Greensboro and Kernersville. We expect service standards to change considerably — and not for the better.

North State focuses on serving residential and business customers. Segra focuses on serving carriers, enterprises, governments, and health care organizations. It is virtually impossible to believe that after the merger is complete (or even before) that North State’s new bosses will deliver the same “small business responsiveness and attention” that has been so important to North State customers for decades. Instead of getting more for less, North State’s residential and business customers are likely to get less for more.

The Bottom Line

While the future remains to be seen, in our 20+ years of business we have seen this scenario play out MANY TIMES in the telecommunications industry — and the only group that usually wins are those at the top of the pyramid. For dedicated workers and loyal customers, the story is much different and far worse. Unfortunately, we expect the same thing to happen here.

About Carolina Digital Phone:

Carolina Digital Phone is locally owned Greensboro NC company, a pioneer of hosted phone services, and provides products that improve the capabilities of business, education and government telephony, while reducing their overall cost. The company’s offerings stand out for their excellent value, including very competitive pricing, the industry’s deepest feature set, ease of deployment, and many user-friendly packages – from a full turnkey setup including dial tone and VoIP phones to automated call answering and routing solutions that work with existing landlines, cell phones or VoIP phones. Learn more at CarolinaDigitalPhone.com

Schedule your free live guided demo and consultation now by calling (336) 544-4000. We can connect with your team in-person at your location, or over the web.