Posted on: Saturday, March 24, 2001

Hawai'i telecom company is sold

By Frank Cho
Advertiser Staff Writer

The new owners of financially struggling GST Telecom Hawaii plan to invest at least $10 million to get the voice and data telecommunications company back on its feet after nearly a year in bankruptcy and compete with local phone giant Verizon Hawaii.

TM Communications- Hawaii LLC, a subsidiary of Japanese trading giant Tomen Corp., is buying almost all of GST Hawaii assets for about $25 million.

The U.S. Bankruptcy Court in Delaware approved the sale of assets Thursday, but the deal still requires federal and state regulatory approval.

The transaction brings back a number of former GST executives to lead the Hawai'i operations, including former chairman and chief executive John Warta and Hawai'i regional vice president Rob Volker.

"We think there is some opportunity for residential service, but we are going to focus on our business customers first," said Volker, who will serve as president and chief operating officer of the new company.

GST Telecom, which has been for sale since 1999, was a subsidiary of Vancouver, Wash.-based GST Telecommunications Inc., which last year ran out of cash and filed for Chapter 11 bankruptcy protection May 17.

GST spent tens of millions of dollars in the 1990s to develop a fiber-optic connection between the six major Hawaiian islands and was one of only two companies that used its own wire-based network to compete with Verizon Hawaii, the state's dominant carrier. Oceanic Communications is the other.

GST had planned to eventually go head-to-head with Verizon in business and residential markets, but, like other telecom players, it never widely offered residential service.

In addition to operating the interisland network, GST provides phone service to local businesses and operates an Internet service provider, GST Hawaii OnLine.

Tomen, which was the senior secured creditor of GST's assets in Hawai'i, and NextNet Investments, a Warta company, plan to form a new Hawai'i-based partnership to run GST Hawaii.

The new company will take over GST Hawaii's operations Tuesday.

The company's existing staff of about 40 employees will be retained, and Jeff Roe, general manager for GST Hawaii since December, will also stay on.

The company's new name has not been determined yet.

As part of the assets, the new owners will also get GST's Hawaii Online Internet Service.

The bulk of GST Telecommunications' Mainland business was sold to Time Warner Telecom Inc., a provider of telephone and Internet service to businesses, for $690 million in January.

Much of GST Hawaii's interisland fiber-optic network was excluded from the sale, but Time Warner subsidiary Oceanic Communications did acquire a portion of the Hawai'i network.

Frank Cho can be reached by phone at 525-8088, or by e-mail at fcho@honoluluadvertiser.com