In mid-October, an article appeared in a premium-membership edition of The Wall Street Journal, breaking the news that a Louisiana telecommunications company might soon be bought, with the headline proclaiming, “Family-Owned Eatel Explores a Sale.”
The prospect wasn’t all that surprising. In an industry rife with mergers and acquisitions, Eatel—a small, yet profitable company with a sizable fiber network—seemed the ideal prey, waiting to be gobbled up by bigger players hungry for a good deal. Local analysts had expected as much for years.
What came next, though, left onlookers scratching their heads. The entity that would end up buying Eatel was not some large, out-of-state competitor, nor was a private equity firm with its sights set on the company.
Rather, in a case of the tiny buying the small, it was RTC—a little known Reserve-based telecom provider—that was acquiring Eatel. More remarkably, the sale was handled by auction, meaning this company that few had ever heard of had put up the highest bid among some 20 firms vying to own Eatel.
On its face, the deal essentially combines the two local providers, integrating operations while keeping Eatel intact. But something didn’t add up. How does a small firm like RTC scoop up another company roughly four times its size?
With the help of significant financial backing is how. Like the kind of financial might held by RTC’s owners, identified on the company website only as “a prominent family from Louisiana”—a family Baton Rouge knows well.
Brothers Sean and Kevin Reilly, who run the Lamar Advertising Company empire, have been quietly involved with RTC for two decades, initially teaming with a venture fund that acquired it in 1998 and then buying the company outright in 2007. Not ones to micromanage, however, the brothers have for years kept a low profile when it comes to RTC.
“We’re pretty quiet in the way we go about business,” Kevin Reilly says. “So when brokers looked at the universe of potential Eatel buyers, they never considered us.”
For the Reillys, the Eatel deal right in their own backyard was one they didn’t want to pass up, and the timing was right to make their move.
“Our family is interested in private equity, buying businesses and holding them forever,” Kevin Reilly continues. “For the last few years, we had a negative point of view regarding evaluations and government intervention into the economy, so we were sitting on the sidelines. After waiting patiently for five years, it took minutes to make the decision.”
So what comes next for these combined local companies, backed by a powerful family like the Reillys? Expansion? Future acquisitions? New services? All are possible, but for now it’s too early to talk long-term strategies, executives say. The deal closed May 31, less than a month ago, and the immediate focus is on merging operations.
Those familiar with the local telecom industry, meanwhile, call the deal a win for the area. Sean Montgomery, a tech industry veteran and former manager of the Baton Rouge data center now owned by Eatel, says having a robust local telecom company like Eatel offers a rare competitive advantage that most other cities don’t enjoy.
“Having worked across the country, there are no Eatels in other markets this size,” says Montgomery, who has since moved out West. “The worst thing that could have happened is if some national company came in because they would have dismantled it.”
With the RTC deal, the opposite is happening. And having the Reillys on board, says Montgomery, puts the company in an even better position to compete.
“The Reilly family, they already run national companies,” he says. “If they want to take the magic that is Eatel and grow it, they definitely have the business experience to do that.”
It was by chance that RTC President William Ironside found out Eatel was for sale. Last year, while exploring an acquisition opportunity in Arizona, a broker made an offhanded comment to him about the Eatel auction; Ironside stopped in his tracks and grabbed his phone.
“I called Sean Reilly, and he said buy it,” Ironside recalls. “He said buy it and I don’t care what you have to pay.”
For the Reillys, the deal was perfect. The companies share similar histories, services and—perhaps most importantly—geographical borders. Eatel’s footprint stretches across most of the Capital Region, with its home base in Ascension Parish. RTC covers St. John the Baptist, St. James and Lafourche parishes.
Combining them creates a contiguous network from Grand Isle to Baton Rouge. Even more appealing, both companies already fare quite well for themselves along that stretch, holding their own against bigger players in their respective areas.
“RTC has competed successfully against AT&T and Charter for decades, and Eatel has competed successfully against Cox and AT&T for decades,” Sean Reilly says. “There are very few regional, independent, sophisticated telecommunication companies left. This is a prized asset.”
The shared local focus was key. RTC and Eatel, both founded in 1935, have been family-owned for much of their corporate lives, beginning with the Maderes (RTC) in Reserve, and the Bankers and Scanlans (Eatel) in Gonzales. Both telephone companies were launched in the home of their founding family. Under the RTC-Eatel deal, the two will remain local, family-owned and community-oriented, retaining a sense of familiarity among customers.
“You just don’t get those things from the larger, 800-pound gorillas who don’t live, shop and send their kids to school in this area,” says Eatel President Josh Descant. “Also, this protects jobs here.”
Still, what caught the attention of brokers was the difference in size. Eatel has some 50,000 customers in a wider footprint, while RTC, with its more rural base, has 10,700. And few, once you got beyond inner circles, knew the Reillys were involved with RTC or on the hunt for a deal.
“We’re very disciplined. We can sit back and wait before taking a swing at a deal,” says Ross Reilly, son of Kevin Reilly, general manager of Lamar and part owner of RTC. “We were lucky enough to stumble upon the Eatel deal. We weren’t even called or considered. We found out secondhand and came late to the table.”
Late, but prepared. RTC executives put up the highest bid and Eatel was theirs. Details of the deal were not disclosed, nor were the other bidders due to nondisclosure agreements, but it’s fair to say roughly 20 entities were involved in the bidding, the competition was tough and RTC was the only Louisiana player at the table.
So what does all of this have to do with Lamar Advertising, Louisiana’s fourth-largest public company and one of the top billboard firms in the nation? Nothing, says Lamar CEO Sean Reilly.
The RTC-Eatel deal is independent of Lamar. It’s a personal investment for the Reilly family, one they plan to hold onto for life. The family isn’t totally new to the industry. In a former life, Sean Reilly gained experience in telecommunications as head of a wireless company for a stint in the 1990s.
The family also has an interest in the business of private equity, though Kevin Reilly says their strategy is a bit different than a traditional investor, as they prefer to buy and hold rather than buy and sell.
“Kevin told us when they bought RTC, they bought it forever,” Ironside says. “I remember Kevin saying this was for his grandkids. I was thinking, ‘Wow, this tiny company?’”
Under the Reillys watch, though, the company grew, expanding its reach in St. John and St. James and entering Lafourche Parish. The brothers weren’t involved in day-to-day operations, but they advised the company on strategy and capital allocation, encouraging RTC to reinvest its profits into enterprise.
The Reillys have a similar approach in mind for Eatel.
“When you look at our style of management, we love the fact that we have really talented, competent people running these enterprises,” Sean Reilly says. “It doesn’t require that we hover or micromanage. They’re extremely good.”
For the first few years, the goal for RTC and Eatel—and their top executives, Ironside and Descant—is to blend the two companies together, and they are quick to admit there are no preconceived notions as to what that will look like yet.
“We don’t have pressure on us to make radical changes,” Descant says. “These are two well-run, profitable companies that will look for synergies.”
Technical integration, thanks to proximity, can take place immediately. RTC will convert to Eatel’s IT platform, Ironside says, because Eatel—being a bigger company—has more internal support staff. The headquarters will also move to Gonzales, where Eatel is based. Both companies will retain their individual brands.
Besides that, the end game for now is simple: be the best where they are now.
“We’re not trying to be all things to all people, but we do want to have the fastest, most robust fiber backbone in this area,” says Ross Reilly, who will also be involved in the blended company. “We think we can be world-class in that, in our little patch, without necessarily having the scale of our competitors.”
That doesn’t mean expansion isn’t in the future. Sean Reilly says there will be growth opportunities in nearby communities by laying fiber, for example, and perhaps expanding RTC’s commercial offering in Thibodaux to Houma.
In Baton Rouge, where Eatel offers commercial services, Descant says he sees additional capacity to serve more businesses. As for launching residential services in the Capital City, it’s something to be considered, he says, if it makes sense.
The best way to move into residential offerings may be through multifamily units, Sean Reilly says, such as condos and apartments in the Baton Rouge area.
“In the future, I wouldn’t be surprised if Eatel didn’t have residential bandwidth offering,” he says, speaking to the ever-growing demand for bandwidth to power smart homes.
Competition in the Baton Rouge telecommunications industry, though, is fierce. Large players like AT&T and Cox seem to be in an unending arms race for who can provide the best and newest services for consumers with changing habits.
Cox has made its own acquisitions recently, including cloud services firm RapidScale, and Trapollo, a connected health services provider. The company also touts its 1 gig residential service, Gigablast, which it says will be available to its entire south Louisiana footprint by the end of this year, something few others offer.
AT&T, meanwhile, is working to build up its 5G foundation in Baton Rouge, in anticipation of the roll out of the new technology, a hot topic in tech.
Eatel and the Reillys are placing their confidence in its robust fiber network to compete. Descant calls fiber a “future-proof” technology as fiber optic cables are able to handle increasing speeds. And even when 5G is deployed, fiber will be needed to transmit it.
“5G without fiber is like having airplanes without an airport,” Descant says.
Ross Reilly is also confident in the approach, saying the fiber technology will become even more important in a 5G world. The Reillys consider the acquisition of Eatel as their ability to participate in whatever 5G may bring.
Regardless of what’s to come, the local business and tech sector can breathe a sigh of relief knowing Eatel will remain intact and local—if not in a slightly better position than before—with the addition of RTC and the Reillys.
“I was expecting someone bigger to buy out Eatel for a long time,” says Brett Vaughn, chief technology officer at Baton Rouge-based ITinspired. “There aren’t a whole lot of firms like Eatel left. It’s definitely a good thing it’s staying small and based in Louisiana. That’s extremely rare.”
As a tech expert who works with businesses in Baton Rouge, Vaughn says Eatel is a disruptive player in the market, keeping Cox and AT&T in check on pricing. Not many other markets have something like that, he adds.
For that reason, the Eatel-RTC combo becomes even more valuable prey in the eyes of hungry telecom predators—especially in ever-growing Ascension Parish, where Eatel has claimed its stronghold and built a 100%-wired fiber network.
“A lot of companies buyout other companies because of their fiber network,” Vaughn says. “Having that fiber infrastructure is huge. I definitely see them as a high-value target for other companies.”
According to the Reillys, though, this is it. When they bought RTC, they made a commitment, telling Ironside it was forever. The same can be expected for Eatel.
“When you have a company like Eatel, formed by a family in a little pink house, you want to be good stewards,” Ross Reilly says. “You don’t necessarily want to hand it off to a private equity group or bigger company and lose the things that made it important to begin with.”