Another hiccup in Verizon sale

The Commonwealth Telecommunications Commission’s final order that gave the go-signal for the proposed multi-million-dollar sale of Verizon to Pacific Telecom Inc. may not be final after all.

Beating yesterday’s deadline to file requests for reconsideration, Micronesian Telecommunications Corp. and PTI—and intervenors Gov. Juan N. Babauta and CNMI consumer counsel Brian Caldwell—separately filed their respective pleadings that wants the CTC’s final order to be modified.

PTI is requesting changes to some of the conditions set forth in the final order, which it referred to as unnecessary extension of the CTC’s regulatory authority over the companies’ financial affairs.

“PTI requests that rather than requiring all payments and allocations between MTC and its owner-affiliates to be pre-authorized by the CTC, that the CTC instead permit such payments and allocations, provided they are on a commercial arms-length basis,” the companies’ attorney, Steven Carrara, said.

On the other hand, Babauta and Caldwell want the CTC to impose dividend reporting obligations on PTI, including the company’s intention to declare a special cash dividend at least 30 days before the declaration, its intention to transfer more than 5-percent of retained earnings to a corporate parent over a six-month period at least 60 days before the actual transfer, and the company’s most recent quarterly common stock cash dividend payment.

Babauta and Caldwell said that PTI had concealed to them that the company found a new lender and negotiated two potential loans, until the information became necessary for auditing firm Deloitte & Touche to consider. They said they knew about the development only upon receiving the Deloitte & Touche report.

Assistant attorney general James Livingstone, who represents Babauta, and Caldwell, said the CTC should revert to the 10-day deadline instead of seven days before the closing of the sale, in connection with the requirement for PTI to submit to the commission all of its financing documents. The deadline will allow them to address any changes.

They also said the companies should be required to submit a proposed draft agreement regarding technical services agreement between them. They want the CTC to require father-and-son Ricardo and Jose P.R. Delgado, the owners of PTI, to submit audited financial statements that are compliant with telecommunications regulations.

Meanwhile, the MTC and PTI asked the CTC to consider comments by CoBank, one of PTI’s financiers. Carrara said that CoBank is experienced in providing telecommunications acquisition financing and was involved in the acquisition of the Guam telephone system.

MTC-PTI lawyer Carrara also requested the CTC to relax its requirement for the companies to join the National Exchange Carrier Association, subject to their demonstration of good cause within 119 days of closing the telecom deal.

PTI had initially agreed to join the NECA as part of the 27-point agreement, which the companies reached with the intervenors before settlement hearing officer Sean Emory Frink. The parties expected PTI’s membership to NECA to provide assistance to rate and tariff development, industry database management, compliance auditing, economic forecasting, trend analysis and regulatory policy analysis.

“As NECA membership may prove to be financial liability rather than a benefit to MTC, PTI proposes modification of the final order,” Carrara now says. The companies also want an extension to the deadline for closing the telecom deal from Aug. 11 to Aug. 30.

The CTC released its final order last June 16, over one year and nine months after MTC and PTI jointly applied for the approval of transfer of all common stock.

But the commission also ordered the conduct of a contested case proceeding on competitive issues related to Verizon’s sole ownership of the CNMI’s only inter-island cable, asserting its jurisdiction over the matter.