Carlyle proposed in May to buy Verizon Hawaii for $1.65 billion and is waiting for regulatory approval, which Kennard said could come as early as next month.

Carlyle plans to rename the company Hawaiian Telcom and move Verizon Hawaii's Mainland functions to Hawai'i. Carlyle also hopes to build the business by offering new services. If the global equity firm succeeds in making Hawai'i's phone company more valuable, the most likely buyer of the business would be the public, Kennard said.

"The IPO exit, which is the most likely outcome here, is good for the company (and) good for the community because it means that the management team will be stable," he said.

Such companies can be attractive investments for the stock buying community because they generate stable revenues and pay regular dividends, the former Federal Communcations Commission chairman said.

An acquisition by a major competitor such as SBC Communications Inc. would be unlikely because of the state's remote location. That's one reason cited by Verizon Communications Inc. for putting the business up for sale.

"If SBC were to buy this company the first thing they'd do is the same thing Verizon did to GTE — they'd blow out half the management team and centralize the operations on the Mainland," Kennard said. "We've seen how demoralizing that is to the company here."

Verizon is Hawai'i's main provider of telephone services. It was formed in 2000 when GTE merged with New York-based Bell Atlantic. Connecticut-based GTE Corp. acquired Hawaiian Telephone in 1967.

The business attracted Carlyle's interest in part because other major communications companies weren't interested, Kennard said. That approach is in line with the $18 billion global investment group's strategy of investing in undervalued companies in industries that attract government scrutiny.

In lobbying for regulatory and public approval, Carlyle contends the sale will improve customer service. Competitors and others have raised concerns that the deal would result in a more heavily leveraged company and that Carlyle would not achieve its goals without raising rates.

Carlyle has countered by stating it does not need to raise rates to fulfill its business goals. That success hinges on Carlyle's ability to shave costs by eliminating the need for expenses such as Verizon's national lobbying effort, New York offices and corporate jets, Kennard said.

At the same time, the company needs to continue to provide customers with existing and new services to keep them from flocking to competitors.

"We have no illusions of growth," Kennard said. "We're not buying Google. That's not what we do."

"Our experience shows us that you can buy companies like this that are already profitable and drive additional efficiencies out of them," Kennard added. "And with one- to three-percent growth a year you can have a very, very good investment."