The Carlyle Group also meets opposition
to its proposal to buy the telephone carrier
The Carlyle Group's proposed $1.65 billion purchase of Verizon Hawaii picked up the important endorsement of the phone carrier's union during a public hearing last night.
But others testified that the Carlyle Group cared little for Hawaii consumers, and urged the agency to reject the deal.
The hearing was the first of a series planned by the state Public Utilities Commission to gather public comment on the Carlyle Group's plan to buy the 707,000 Hawaii phone lines, print directory, and long-distance and Internet service operations of Verizon Hawaii, which it plans to rename Hawaiian Telcom. About 200 people attended.
Since the deal was announced in May, opponents have pointed with alarm at the Washington, D.C.-based private equity group's reputation for quickly fixing up companies and selling them for a profit.
Carlyle Group Managing Director William Kennard admitted it was possible that might happen with Hawaiian Telcom as well. "If you buy a company and then somebody wants to buy it from you because you've improved it, that's a good thing," he said.
Kennard said his firm plans to invest heavily in upgrading Verizon's aging network, honor the union contract that expires in 2007 and offer comparable employee benefits.
Scot Long, business manager of the International Brotherhood of Electrical Workers, Local 1357, said the Carlyle Group has told the union that up to 100 new jobs would be created initially by the acquisition.
Long told the PUC that the union was satisfied with the deal, but he added that the union remains concerned over the fate of surplus money in Verizon's pension fund.
As part of the deal, Verizon agreed to transfer a fully funded pension plan to the Carlyle Group. But the Verizon fund is believed to contain a surplus possibly in excess of $200 million, Long said. "That money should belong to Hawaii (consumers) because they've been paying into that through their phone rates," he said.
A Carlyle Group representative said there was little chance of addressing that issue without completely renegotiating the terms of the acquisition.
Several people offering testimony expressed concern over the Carlyle Group's intentions.
Speaker Peter Bower said the group had a reputation for using its famously high-level political contacts -- its advisors have included former President George H.W. Bush and former British Prime Minister John Major -- to manipulate government policy for business gain. "The money they'll be making is being made off of us," he said.
Pat Bustamante, president of local phone and Internet carrier Pacific LightNet, which depends on leased Verizon lines for its business, said the Carlyle Group has a "staggeringly diverse portfolio" but no experience running a local phone company.
Pacific LightNet fears the change of ownership could result in service disruptions that may harm its business, he said.