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Maui firm:
We bid first for
GST’s isle assets

But GST says the
deal did not pan out

By Rob Perez
Star-Bulletin

A Maui company said today that it agreed to purchase GST Telecommunications Inc.'s Hawaii assets for $76 million several weeks before another company signed a letter of intent to acquire substantially all of GST's assets -- here and on the mainland -- for $450 million.

MBN Communications Inc., a privately held company based at the Maui Research & Technology Park, said it signed an agreement April 27 to pay all cash for GST's Hawaii subsidiaries, GST Telecom Hawaii Inc. and GST Hawaii OnLine.

The competing bid represents the book value for the Hawaii assets, MBN said, while Time Warner Telecom Inc.'s $450 million proposed deal is less than 50 percent of Vancouver, Wash.-based GST's total asset value.

Time Warner Telecom on Tuesday signed a letter of intent to acquire the GST assets. That was the day before GST filed for Chapter 11 bankruptcy protection, citing cash and debt problems. GST and Time Warner Telecom jointly announced the $450 million proposed deal on Wednesday. No mention was made of the April 27 deal with MBN.

A GST spokesman, however, said today that the MBN deal did not pan out and GST subsequently signed the letter of intent with Time Warner.

MBN said it intends to take its bid directly to GST's largest creditors. That raises the possibility of a bidding war in bankruptcy court over the isle assets.

An MBN spokesman said the Maui company, which was formed in June 1999, intends to provide communications and Internet services to business, government and education customers in Hawaii. It plans to establish a telecom network through acquisitions.

Bob Meldrum, a Time Warner Telecom spokes- man, said his company would have no comment on MBN's bid. "We're definitely proceeding with our agreement," he said.

Meldrum said the bankruptcy court is scheduled to hold a hearing in early June, after which more details on the process for dealing with GST's assets will be known.

Time Warner Telecom intends to seek an expedited completion of its deal with GST, he said.

If GST creditors, who are owed about $1.2 billion, accept Time Warner Telecom's bid and ignore MBN's offer, "they would leave as much as $40 million on the table for the Hawaii assets alone," MBN said in a statement.

The Time Warner Telecom deal includes all of GST's Hawaii assets, chief among them a fiber-optic network connecting the state's six main islands.

Analysts say that network would be a major boost to Time Warner's local affiliate, Oceanic Communications.

Oceanic currently has a fiber-optic network serving business and government customers on Oahu. The GST system would immediately transform the company into a statewide player in Hawaii's telecom industry.