Friday, July 23, 1999

GST selling
main Hawaii assets

The telecom firm wants
to focus on the mainland

By Rob Perez


A major player in Hawaii's telecommunications industry intends to sell its main assets here and leave the market before the end of the year.

GST Telecommunications Inc., which has spent tens of millions of dollars the past several years to create a sophisticated fiber-optic network connecting the state's main islands, is soliciting offers for its Hawaii facilities, company spokesman Steve Kuyatt said yesterday.

In addition to running the interisland network, GST provides phone service to local businesses and operates an Internet service provider, GST Hawaii OnLine.

Kuyatt said it was too soon to know whether the online operation would be included in the sale.

GST is one of only two companies that uses its own wire-based network to compete with GTE Hawaiian Tel, the state's dominant carrier. Oceanic Communications is the other.

After a management change last year, GST re-evaluated its corporate strategy and decided to concentrate on its core market, the western United States, and sell its noncore assets, including the Hawaii operations, according to Kuyatt.

"They're really not in line with the direction the company is going," he said.

Kuyatt declined to say whether the company is talking with prospective buyers.

As part of its divestiture strategy, GST this week announced agreements to sell its telecom operations on Guam. Sprint Corp. is purchasing GST's equipment network there, and Startec Global Communications Corp. is acquiring GST's customer base. Purchase prices weren't disclosed.

GST's decision to leave the Hawaii market has surprised some industry officials, especially given the significant investments the company has made here in just the past few years.

At a high-profile contract signing in late 1996, GST's then-president, John Warta, said the company intended to spend $49 million to $54 million over the next two years to build its interisland fiber network. Gov. Ben Cayetano attended the ceremony and lauded GST for investing so much in the state.

Kuyatt yesterday couldn't say how much GST ended up spending on the network but said Warta's projections were in the ballpark.

GST had plans to eventually go head-to-head with GTE in business and residential markets, but, like other telecom players locally, it has yet to launch residential service.

Warta, a key proponent of GST's push into the Hawaii market, left the company last year, triggering the change in corporate focus.

While GST wouldn't say whether it was talking with prospective buyers, two companies that are expanding locally, AT&T Corp. and Sprint, seem like good candidates.

"We would definitely assess the opportunity," said Ken Sandefur, vice president for AT&T in Hawaii.

Asked whether Sprint would be interested, Nonie Toledo, vice president and general manager of Sprint Hawaii, declined comment.

GST is the second telecom company this week to disclose that it is leaving the Hawaii market. TelHawaii Inc. said it planned to leave the Kau region on the Big Island by the end of August, citing costly delays in its legal battles with GTE.

But GST's pullout is more in line with the consolidation and retrenchment wave sweeping the industry, officials said.

Sandefur, who didn't know GST was selling its local assets until contacted by the Star-Bulletin, said he believes GST's decision shouldn't be linked to Hawaii's poor economy. Instead, he said, it reflects the increasingly competitive nature of the telecom industry, marked by mergers and acquisitions.

Both AT&T and Sprint, in fact, have been involved in deals this year to boost their Hawaii reach.

Sprint recently completed its acquisition of wireless carrier PrimeCo Hawaii. And AT&T is in the process of acquiring Honolulu Cellular, Hawaii's largest wireless carrier.

Both moves were made by the respective companies to offer their customers a greater variety of services.

And as with the GST move, the PrimeCo and Honolulu Cellular deals were driven partly by the sellers wanting to focus on their mainland markets.

PrimeCo was owned by a partnership of telecom companies, and Honolulu Cellular is owned by BellSouth Corp.

Sandefur said that despite Hawaii's shaky economy and the exits of the various telecom companies, he anticipates good times for the local industry in the years ahead. "I see nothing but growth, especially in technology."

GST's Kuyatt said the company is taking its time finding a buyer and won't unload the assets at a deep discount.

"We know what they're worth, and it's not going to be a fire sale," he said.

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