CommScope wins Casa's cable asset auction with $45.1M bid

In a surprising result, CommScope won the auction for Casa Systems' cable assets with a bid of $45.1 million – more than doubling Vecima Networks' original "stalking horse" bid of $20 million.

Vecima announced it has been designated the back-up bidder, with its top bid of $44.95 million.

"Vecima conducted extensive due diligence prior to the auction and, based on those insights, made the decision at the end of the auction not to increase its bid any further when the proposed price was no longer reasonably supported by Vecima's valuation of the assets," the company said.

Harmonic, said multiple people familiar with the auction, was the third and final bidder in the Casa cable asset auction, which got underway Wednesday (May 29) at 10 a.m. ET. UK-based Technetix, which has made prior offers for Casa's cable business, had explored joining Wednesday's auction, but ultimately did not bid in the auction.

People familiar with the auction said bidding took place throughout most of Wednesday, with parties bidding in relatively small increments that ultimately led to CommScope's final bid of $45.1 million.

A sale hearing to approve the transaction is set for June 4, 2024, at 2:30 p.m. ET, according to this filing with the US Bankruptcy Court for the District of Delaware. Any objections must be filed on or prior to May 31, 2024, at 4 p.m. ET. The transaction is expected to close June 6, 2024.

Related:Vecima notches record quarter as Casa auction looms

Cable represents the last leg in Casa's asset sale

The auction of Casa's cable assets is part of a court-supervised Chapter 11 process that also included the sale (also via auction) of Casa's 5G mobile core and RAN assets to Lumine Group for $32.25 million. In a separate transaction, DZS snapped up Casa's Netcomm business for $7 million – that figure could rise to $10 million based on Netcomm 2024 revenues.

As the auction winner, CommScope stands to expand its cable portfolio with Casa products that include fiber nodes, integrated cable modem termination system (I-CMTS) chassis, as well as a relatively new virtual CMTS that has gained traction with Canada's Rogers Communications and Claro Colombia.

Casa's virtual broadband network gateway (vBNG) could serve as a complement to CommScope's fiber access business, but there is significant overlap between CommScope and Casa when it comes to I-CMTSs, vCMTSs and fiber nodes.

vCMTS market heats up

The auction result brings further consolidation to the cable access sector and effectively turns the vCMTS market into a three-horse race between Harmonic, CommScope and Vecima.

Related:Casa Systems to sell off its cable and 5G core/RAN businesses

CommScope recently put its vCMTS initiative on the front burner. Its vCMTS is now in trials with multiple operators and has at least one deployment commitment. It's not immediately clear if CommScope intends to go forward with its own vCMTS product, Casa's vCMTS or perhaps a mix of both.

But the auction win does ensure that CommScope will be a player in the vCMTS market as more cable operators make their vendor selections. A big one on the table is Cox Communications, which recently issued a vCMTS request for proposal (RFP), an industry source said.

Armed with deals with Comcast and Charter Communications, Harmonic is the vCMTS market leader by a long shot, ending Q1 2024 with 118 "cOS" (formerly known as "CableOS) customers and about 28.6 million cable modems served by its virtualized access network platform. Vecima is also in the game following the recent introduction of its own offering, the Entra-branded vCMTS.

Buying some market share

But CommScope also stands to gain some market share with the Casa transaction. Charter, for example, does have some legacy Casa I-CMTSs in the field (primarily in the New York City area), but Casa has no role in Charter's hybrid fiber/coax (HFC) upgrade project, which includes upgrades to a distributed access architecture (DAA) and vCMTS deployments in a portion of the operator's footprint.

Related:Casa's cable auction might draw more bidders

Vodafone, Videotron, Rogers, Liberty Global and Japan's J:COM are among other tier 1 customers of Casa's legacy CMTS and node products. Once its winning bid clears the bankruptcy court, CommScope will obtain that legacy business and likely put it in position to support future network upgrades at those operators.

Still, the result is somewhat surprising given CommScope's recent financial struggles, and word that the company has been looking to sell off assets to help trim down its heavy debt load. However, CommScope has been adamant that it won't sell assets on the cheap.

But the play for Casa's assets is a clear indication that CommScope intends to remain squarely in the cable access network market, and to become more aggressive as cable operators consider HFC upgrade paths with DAA, virtual CMTSs, DOCSIS 4.0 and even enhanced DOCSIS 3.1 technologies.

CommScope believes the transaction for Casa's cable assets will help to shore up the market position of its Access Networks Solutions (ANS) unit and deliver "significant synergies."

"The strategic accretive acquisition strengthens CommScope’s Access Network Solutions leading market position, including enhancing its virtual CMTS and PON product offerings," CommScope CEO Chuck Treadway said in a statement. "Adding Casa's technology to our portfolio will allow us to provide a seamless transition for our combined customer base that utilize both integrated and virtual CMTS products. This transaction provides stability to Casa's customers while allowing CommScope to further grow our customer base as we enable customers to migrate to Distributed Access Architecture solutions on their own timeline."

Vecima raised financing for bid

Vecima reiterated Thursday that it remains in position to pursue its broader product and business growth strategies without Casa's cable assets.

"Irrespective of the outcome of the auction, Vecima remains firmly positioned to drive the industry forward to the multi-gigabit networks of the future across both fiber and cable access," Vecima President and CEO Sumit Kumar said in a statement. "Vecima is entering a new era of growth, and we are excited by the market and technology opportunities ahead."

But in preparation for a possible successful bid, Vecima on Wednesday (May 29) closed financing up to $32 million Canadian dollars (US$23.32 million) along with the potential for an additional C$4.52 million ($3.3 million) in financing.