Posted on: Saturday, April 9, 2005

Verizon buyer accepts terms

By Sean Hao
Advertiser Staff Writer

Verizon Hawaii cleared the last major hurdle on its way to becoming Hawaiian Telcom yesterday when the proposed buyer of the state's main phone company agreed to accepted state imposed conditions on the sale.

The planned $1.65 billion sale of Verizon Hawaii to The Carlyle Group had been in limbo for weeks after state regulators issued a list of restrictions aimed at ensuring consumers benefit from the highly leveraged deal.

The state said Carlyle must kick in more cash, restrict dividends to debt repayment and not sell Verizon's print directory business without separate state approval. To comply with those terms, Washington, D.C.-based Carlyle and Verizon agreed to modify the terms of the sale by reducing the purchase price for Verizon Hawaii from $1.65 billion to $1.6 billion. Carlyle also will boost its equity investment in the deal from $400 million by an unspecified amount.

"Together these changes will enable the transaction to comply with the recent Public Utilities Commission order concerning the transfer of control of Verizon Hawaii to Carlyle," the companies said in a joint statement.

Additional terms were not released. Before the modifications, the deal was expected to net Verizon Communications Inc. more than $850 million, while tripling the local phone company's debt from $427 million to $1.39 billion.

Carlyle contends the sale will return management of the phone company to Hawai'i while boosting local employment and customer service. However, the state consumer advocate, the Public Utilities Commission and others expressed concerns that the large debt load could increase the risk of the company failing.

The deal is expected to close early next month.

The transaction includes Verizon Hawaii's local telephone operations and print directory, long-distance customer base and Internet service provider businesses, but excludes Verizon Wireless.

Following the sale will be a nine-month transition as Verizon Hawaii operations on the Mainland shift to Hawai'i, creating an unspecified number of jobs. Verizon Hawaii has about 1,700 employees. About 1,300 are members of the International Brotherhood of Electrical Workers Local 1357.

Scot Long, business manager for the union, said the announcement that the sale will go through helps eliminate uncertainty surrounding the phone company's future. Long added that Carlyle's plan to bring certain administration jobs back to Hawai'i should be good for members.

"I know in working with The Carlyle Group this last month that the benefits to the members will be clear," Long said.

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.