Verizon: Selling cable would not serve NMI’s interests

In response to a demand by Gov. Juan N. Babauta that the Micronesian Telecommunications Corp. divest its undersea fiber optic cable, MTC categorically says that such a divestiture would not serve the interests of Marianas consumers. The proposed purchasers of MTC said that any required divestiture would force them to reconsider their plans to invest in MTC.

MTC is the local business operation of telecommunications giant Verizon.

Babauta has demanded the cable divestiture in connection with his longstanding opposition to the acquisition of MTC by Pacific Telecom Inc. The governor, whose objections to the transaction were rejected by the Federal Communications Commission, has made filings with the Commonwealth Telecommunications Commission demanding that the CTC either block the acquisition or impose a large number of onerous conditions, including divestiture or confiscatory regulation of MTC’s undersea cable.

“The governor is asking us to take an action which makes no sense, either from MTC’s business perspective or for the people of the Mariana islands,” said Tony Mosley, general manager of MTC. “MTC has invested large amounts of money to build and maintain the fiber optic cable. The cable provides critically needed telecommunications services to the people of the islands. We make access to the cable available on a tariffed basis to anyone who wants it. The cable has not been a financially lucrative investment for us; we haven’t earned an adequate rate of return on it, but we consider it an important element in fulfilling our obligation to provide a vital public service. We can see no factual or logical basis for the governor’s demand that we sell the cable.”

Ricky Delgado of PTI, the company seeking to acquire MTC, commented: “It would be unrealistic and unreasonable to require MTC to divest its cable, especially in a fire-sale situation. Doing so would diminish MTC’s ability to serve its customers, damage its financial condition and reduce its future revenues.”

Delgado noted that PTI and MTC have conditionally agreed to a large number of concessions in connection with the transaction, including elimination of tolls on calls between Saipan, Tinian and Rota, freezes on local rates for two years after the sale closes, and significant levels of future capital expenditures to improve MTC’s network and systems. But those concessions will be implemented only if the sale to PTI closes.

“To satisfy the regulator of our commitment to the Commonwealth, we have agreed make numerous changes that will bring significant new benefits to consumers in the Marianas,” said Delgado. “It would be a shame if these efforts—and the potential benefits to the people of the Commonwealth—are lost as a result of the governor’s unreasonable demands.”

Asked about the governor’s position, John Doherty, chief financial officer of Verizon International, said: “Verizon will not comment on any of the specific demands made by Governor Babauta, since these are matters that must be assessed by MTC and its intended future owners. But we are extremely disappointed that the governor is trying to stand in the way of the sale transaction. The sale to PTI would bring in new owners who intend to re-energize and expand MTC’s products and services. The governor’s actions threaten to deprive the Mariana islands of the benefits of improved telecommunications services.

“By impeding the transaction, the governor also sends a very negative message to those who might consider investing in the Marianas. They will look at Verizon, which has invested large amounts in the Marianas over a long period of time, and see that the local government wants to prevent us from exiting our investment. Nobody wants to invest if it looks like they will be locked into the investment forever. We stand ready to achieve a smooth transition to new ownership of MTC, and hope the CTC will recognize the benefits of the proposed transaction and speedily approve it,” he said.

PTI’s proposed acquisition of MTC was approved by the Federal Communications Commission in November 2003, over objections filed by Babauta. The only remaining regulatory clearance required for the transaction to close is approval by the CTC, which has been considering the transaction since April 2003.