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GST-Time Warner
deal collapses

The buyout was to have included
GST's isle assets and would
have boosted Oceanic

From staff and wire reports

VANCOUVER, Wash. -- Time Warner Telecom Inc., a provider of telephone and Internet service to businesses, said today it has canceled its planned $450 million purchase of rival GST Telecommunications Inc., which is in bankruptcy proceedings.

Time Warner Telecom, 48 percent owned by No. 1 U.S. cable-television operator Time Warner Inc., said it could not reach favorable terms on a final agreement with GST and its creditors. The companies didn't elaborate on issues preventing completion of the transaction announced May 17.

Instead of selling to Time Warner Telecom, GST said today it would ask a federal court in Delaware to let it sell most of its assets at auction. GST filed for Chapter 11 bankruptcy protection in Wilmington, Del., on May 17, citing high debt and insufficient cash flow.

The deal was to have included the Vancouver, Wash-based company's Hawaii subsidiaries, GST Hawaii On Line and GST Telecom Hawaii Inc., which operates a statewide fiber-optic network.

After the deal was announced, a privately held Maui firm, MBN Communications Inc., said that it had agreed to buy GST's Hawaii subsidiaries for $76 million weeks before the Time Warner Telecom-GST deal. A GST spokesman, however, said last month that the deal with MBN did not pan out and GST subsequently signed a letter of intent with Time Warner Telecom.

MBN, based at the Maui Research & Technology Park, was formed last June and plans to provide Internet and telecommunications services to business, government and education customers in Hawaii. The company said last month that it intended to take its bid direct to GST shareholders.

An MBN executive today said the company was still interested in GST's Hawaii assets but he would not comment further.

GST, which provides voice, Internet and data services in Western states, listed $489.1 million in assets and $179.7 million in debts in its May 17 bankruptcy filing. In March, the company restated 1999 financial results and said its chief financial officer would step down.

Time Warner Telecom sells voice and data service using its fiber-optic network to businesses in 21 U.S. metropolitan areas. The Littleton, Colo.-based company said termination of the GST transaction will not effect plans to expand into eight to 12 new markets in the next two years.

A sale of GST's Hawaii assets to Time Warner Telecom would have been a boon to Oceanic Communications, Time Warner's local affiliate, analysts had said.

Trading in GST's shares was halted last month on the Nasdaq Stock Market. They rose 11 cents to 95 cents on May 16, the last day they were traded.

Time Warner Telecom shares fell $4.11 to close at $69.89 in Nasdaq trading today.