PTI.docx

DECISION MEMORANDUM
TO:COMMISSIONER HANSEN
COMMISSIONER NELSON
COMMISSIONER SMITH
MYRNA WALTERS
TONYA CLARK
STEPHANIE MILLER
DAVE SCHUNKE
JOE CUSICK
DAVID SCOTT
WORKING FILE
FROM:DON HOWELL
DATE:AUGUST 13, 1997
RE:CENTURY TELEPHONE’S ACQUISITION OF PACIFIC TELECOM, INC., DBA GEM STATES UTILITIES, NO CASE NUMBER
On July 17, 1997, Pacific Telecom, Inc. (PTI) filed a “formal” Notice advising the Commission that Century Telephone Enterprises intends to acquire the entire stock of PTI.  PTI operates as Gem State Utilities and is a wholly owned subsidiary of PacifiCorp.  Gem State serves 1,500 access lines in and around Grand View, Idaho.  PTI is 100% one party service and experiences 1.1 out of service trouble reports per month/per 100 access lines.  Transmittal Letter at 1.  Century serves approximately 4,200 access lines in north-central Idaho.
The Notice
PTI had earlier advised the Commission in June 1997 that it was being acquired by Century.  PTI notes in its transmittal letter, that “the essential effect of this transaction is to substitute a telephone company, Century, for an energy company, PacifiCorp, as the grandparent corporation of Gem State.”  PTI maintains that from the point of view of its Idaho customers, the transaction will be completely transparent.  “The change of ownership is occurring at the holding company level; it is a stock transaction, not an asset transaction.  Gem State, itself, is unaffected by the sale of PTI stock.  The transaction requires and will result in no changes to the regulated books, rates or services of Gem State. . . .Century is not seeking any ‘acquisition adjustment’ or other rate-related change in connection with the purchase of PTI’s stock.”  Transmittal Letter at 1.
As part of its notice, PTI included the affidavit of Kenneth R. Cole, President, Telephone Group of Century Telephone.  In his affidavit, Mr. Cole indicates that Century is currently the 15th largest local exchange company in the nation and the 12th largest cellular company.  Nationwide, Century serves approximately 520,000 access lines in 14 states.  All of Century’s local exchange entities are “rural telephone companies” within the meaning of the federal Telecommunications Act.
Century will acquire all of PTI’s existing stock and debt and will pay PacifiCorp $1.523 billion in cash for PTI.  Century has obtained a line of credit of $1.6 billion from NationsBank.  Mr. Cole states that PacifiCorp’s desire to sell PTI and concentrate on its energy business.  At the completion of the transaction, Century’s combined revenues will be approximately $1.4 billion annually; local exchange operations will more than double in size to 1.2 million access lines; with 9.9 million in cellular POPS and 8 million PCS POPS.
Mr. Cole indicates that the transaction will be in the public interest.  He suggests that the combination of Century and PTI’s operations will result in a larger, stronger corporation entity.  He indicates that Century is experienced in delivering telecommunication services to rural America and is dedicated to continuing its focus on its rural customers.  Affidavit at 5.
He indicates that PTI’s rates and practices will remain the same.  Gem State’s books will be unaffected by the transaction.  Century is also not proposing to combine its exchanges with PTI’s Idaho exchanges.  Consequently, there will be no need to seek a study area waiver from the FCC.
As part of its official notice, PTI has requested that the Commission advise it whether any further or additional proceedings are required in connection with the transaction.
Staff Analysis
Given the nature of this transaction, Staff believes that no formal proceedings are necessary in this particular case.  As indicated above, the Century-PTI transition is at the holding company level and has no effect on the operations or upon customers of either Century or PTI.  A similar transaction occurred when TDS acquired Potlatch Telephone in 1988.  Consequently, Staff believes that it is appropriate to advise PTI that no additional materials or proceedings are contemplated in connection with the purchase.  Staff recommends that this item be approved via consent.
Commission Decision
Does the Commission agree with Staff’s recommendation that no further proceedings are necessary in this particular case?

Don Howell
cm\M:PTI.dh