Verizon Hawaii sale
sparks criticismCompetitors and the military
have filed motions to intervene
in the proposed $1.65 billion deal
Pacific LightNet Inc., a Honolulu-based telecommunications provider, filed a motion with the state Public Utilities Commission yesterday opposing the Carlyle Group's $1.65 billion proposed acquisition of local telephone provider Verizon Hawaii.
In addition, the U.S. Defense Department and others are concerned about Carlyle's plans to revamp Verizon's back-office operations.
Pacific LightNet and the Defense Department were among four groups that filed motions yesterday before a deadline to intervene in the commission's review of the Verizon deal.
Groups that are granted intervention will get access to all documents reviewed by the commission and will be able to participate in the discovery process and ask questions of the Carlyle Group, Verizon Hawaii and others involved in the transaction. One of the criteria for granting a motion to intervene is whether the stated concerns are adequately addressed.
"The proposed merger will undoubtedly affect the ability of Pacific LightNet to compete fairly and effectively, as the new entity will be managed by an investment fund that, as a strategic focus, targets a 25 percent annual return for its fund investors, and generally holds its investments on a short-term basis," Pacific LightNet said in its filing.
The Defense Department expressed reservations about the proposed revamp for Verizon Hawaii's back-office operations because, it said, telecommunication infrastructure and service "is essential to the nation's safety, security, federal governmental operations and military readiness" and that defense employees need the highest quality and reliability.
Other motions were filed by Time Warner Telecom of Hawaii Inc., doing business as Oceanic Communications, and the International Brotherhood of Electric Workers Local 1357 on behalf of Verizon Hawaii retirees, though only Pacific LightNet took a position on the merger.
Pacific LightNet and Time Warner are competitors of Verizon Hawaii, but they also depend on their rival's services. Competitive telecom companies rely on interconnection agreements with operators of former monopoly networks to complete phone calls to each other's customers, among other things.
Pacific LightNet and Time Warner said they are concerned because the Carlyle Group is proposing to design and rebuild Verizon's back-office processes within only nine months after obtaining regulatory approvals. Pacific LightNet and Time Warner said the process will take longer and will hamper their own individual operations.
Pacific LightNet said the Carlyle Group has not proposed a credible way to support the time-consuming and costly back-office operation and that, given Verizon Hawaii's aging network, "any resulting back office will likely plague both consumers and competitors with increased rates and an inefficient process."
Verizon Hawaii's back office was dismantled and relocated to the mainland as a result of the 2000 corporate merger that created its New York-based parent company Verizon Communications Inc.
Meanwhile, the electric workers union said Verizon Hawaii retirees are concerned that the liability for their pensions and benefits, such as medical and stock options, are not adequately addressed in the purchase agreement.
Public Utilities Commission
www.state.hi.us/budget/puc/puc.htm