Posted on: Friday, February 20, 2004

Verizon Hawaii for sale

By Dan Nakaso
Advertiser Staff Writer

Verizon Communications Inc. said yesterday it is negotiating to sell its Verizon Hawaii subsidiary, the Islands' primary source of residential telephone service.

Verizon Hawaii, which operates more than 1 million local access lines, declined to identify a possible buyer. Verizon officials in the company's New York headquarters, however, sent an email at noon yesterday to Verizon Hawaii's 1,800 employees, acknowledging "that discussions have taken place," spokeswoman Ann Nishida said.

"No sale is pending. No decisions have been made," Nishida said. "Sometimes these talks lead to nothing."

If Verizon Hawaii were sold, the cost of residential phone service would stay the same because it is regulated by the state Public Utilities Commission.

Business customers worry, however, that their service could change.

"In major ownership changes, customers often suffer inconveniences," said Yuka Nagashima, president of LavaNet Inc., an internet service provider with about 12,000 customers connected through Verizon lines. "Some ownership changes have increased value to the customers in the long run, others have not. How things will play out depend heavily on who the buyer is and what the purchase terms are."

In 2002, Verizon sold local phone operations in Alabama, Kentucky and Missouri.

The Reuters news agency quoted unidentified sources as saying that Verizon Communications wants to sell its local access lines in Hawai'i and upstate New York to reduce debt and shed slow-growth markets.

Such a sale could raise several billion dollars before taxes for the nation's leading telephone company, which dropped its debt load 14.8 percent last year, Reuters reported.

Trimming costs

In September, Verizon Hawaii offered its 550 managers and non-union employees a voluntary separation package to try to trim staff and reduce costs.

Verizon officials yesterday sent the email to Hawai'i employees, Nishida said, because "there were so many news reports and we didn't want them to speculate or have anxiety."

Verizon Hawaii became the name of the local phone company when GTE Corp., owner of Hawaiian Tel, merged with Bell Atlantic Corp. in 2000 to form Verizon Communications Inc.

Verizon Wireless and the Verizon phone directories are separate subsidiaries and would not be affected by the sale of the residential business.

Any potential sale of Verizon Hawaii, merger or transfer of its assets would have to be approved by the state Public Utilities Commission. But "the commission does not get involved until the sale or transaction has been consummated," said Kris Nakagawa, the PUC's chief legal council.

Pat Bustamante does not expect any potential sale to change his residential phone service.

"Because it's a regulated industry, I'm sure the PUC would have an intervention to make sure continuity of service would be maintained and pricing would be maintained competitively," Bustamante said. "I don't believe there should be any down side to it."

Effects of sale

Big changes could affect Bustamante's company, Pacific LightNet Communications, which provides high-speed internet access, telephone service and other data transport over its own fiber optic network, but also relies on some of Verizon's lines.

If Verizon sells its local access lines, Bustamante would hope to see a better network and improved customer services for businesses such as his — without an increase in rates.

"There's always a concern that prices would go up," said Bustamante, president and chief operating officer of Pacific LightNet. "But companies like myself, we're here to be competitive and help keep prices down."

Verizon Communications, the nation's largest operator of local telephone service, has been losing customers to wireless companies and competitors that can lease Verizon's network at a discount and resell the service.

The company wants to move from primarily a local-phone business that's in decline to faster-growing areas, such as high-speed internet access.

At Sprint, one of Verizon's long-distance competitors, company officials believe that any potential ownership change would bring competition and "competition is definitely good," said Sprint spokeswoman Vicki Soares.

"Competition is also always good for the customer," Soares said, "and that's a positive."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.