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Thursday, February 19, 2004



Verizon Hawaii
for sale?

A company spokeswoman
won't comment "on matters
involving any kind of speculation"


Verizon Hawaii is being shopped around by its parent company and has attracted interest from a well-known Washington, D.C.-based global private equity firm, according to a report on TheDeal.com.

Verizon Verizon Communications Inc., which also is seeking to sell its upstate New York local exchange, could receive $1.5 billion from its Hawaii local access lines and $8 billion overall from the divestitures, sources told TheDeal.com.

The Carlyle Group, which at one time employed former President Bush as a senior adviser to its Asia advisory board, is interested in the Hawaiian unit, sources told TheDeal.com. The Carlyle Group has more than $17.5 billion under management.

Verizon Hawaii spokeswoman Ann Nishida said it was the company's policy not to comment "on matters involving any kind of speculation."

A Hawaii source familiar with the situation said yesterday, "There had been rumors for months about Verizon Hawaii being up for sale, but none of that could be confirmed."

A source told TheDeal.com that Verizon is in advanced talks for the Hawaiian sale, with final bids coming as early as this week. Ripplewood Holdings LLC, a New York-based asset management company, also may be interested in the Hawaiian unit, the same source said.

A Reuters story based on TheDeal.com's account said both sales processes were in the early stages.

SBC Communications Inc. was spotted recently at Verizon's local offices, another Hawaii source told the Star-Bulletin. "(Verizon Communications) has come to a crossroad," the source said. "They either have to invest in the company by going fiber optic to get more services and make more money, or they have to sell (units such as Verizon Hawaii) to bring down their debt load."

Jerry Genovia, interim business manager for the International Brotherhood of Electrical Workers Local 1357, could not be reached for comment.

The parent company, which has been restructuring its debt and exiting slow-growth markets, probably doesn't see a growth opportunity in Hawaii, a telecom analyst told the Star-Bulletin last night.

"It's not a surprise that Verizon is looking to sell nonstrategic access lines, especially the ones inherited from GTE," said Patrick Comack, a senior equity analyst for Guzman & Co. in Coral Gables, Fla. "It is a surprise to the extent that they would be selling access lines that are nonrural. They're looking for about $3,000 a line, and that's always been in the context of rural lines."

TheDeal.com said Verizon Hawaii, which has about 715,000 lines, only may be able to get $2,100 a line for its Hawaiian unit because of few potential synergies available with such remote operations, according to a source.

"It's not a clustered market," Comack said. "There are a lot of GTE lines they inherited that probably aren't strategic, and maybe they are good targets for modernization. Certainly, there are private equity investors out there looking for these types of investments."

"I think they had a lot of bait in the water and they finally got a fish nibbling at it," Comack added.

Verizon Hawaii, which used to be known as GTE Hawaiian Telephone Co., was renamed in 2000 when Bell Atlantic and GTE Corp. merged into one company.

The subsidiary has about 2,400 employees.

The last couple of years haven't been easy for Verizon Hawaii as it trimmed its work force.

More than 100 Hawaii jobs were eliminated through voluntary separation packages in 2002 and 2003, and late last year the parent company offered voluntary separation packages for management nationwide.

In addition, the company has been losing about 10,000 customers a month to wireless, which translates to an annual loss approaching $5 million based on monthly telephone charges of $40 to $50, an informed Hawaii source said.



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