20120713Approval to Allow Transfer.pdf

RECEIVED
CmmIA A. Muuo PLLC
8385W EMERALD Siir' Bois, Ijio 83704
[phone] • [e-mail]
July 13, 2012
21112 JUL13 Pfl t:39
IDAHO PU3
UTILITIES COMMISSION
Via Electronic Mall
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, ID 83702
Re: IPUC Case No. MID-T-09-03: Order No. 30869
Dear Ms. Jewell:
As you know, I represent Midvale Telephone Exchange, Incorporated ("MTE") in the
above referenced matter. Finally, more than two and a had years after the Idaho Public
Utilities Commission (the "Commission") issued Order No. 30969, MTE has secured the
approval of all regulatory authorities and lenders to allow the transfer of assets and liabilities
from MTE to Midvale Telephone Company ("MTC"), a wholly owned subsidiary. Attached is
the order from the Arizona Corporations Commission dated January 8, 2012, approving the
transfer of assets and the Arizona Certificate of Convenience and Necessity, and a letter
from the United States Department of Agriculture Rural Development, dated July 2, 2012,
approving the transfer on behalf of the Rural Utilities Service ("RUS"). This letter constitutes
the final approval needed for MTE to complete the transfer of assets and liabilities. MTE has
paid all of its outstanding obligations to the Rural Telephone Finance Cooperative, so
approval from RTFC is no longer required.
The purpose of this letter is to inform you that effective as of July 27, 2012, all assets
and liabilities of MTE will be transferred to MTC in exchange for MTC stock, and to request
that the Commission take all actions necessary to transfer Certificate 254 from MTE to
MTC. MTE and MTC will work with Commission staff to resubmit schedules and tariffs
within the next thirty (30) days pursuant to Order No. 30969 to reflect the change in
ownership structure.
Ms. Jean Jewell
July 13, 2012
Page
If you have any questions or require further information, please contact me at (208)
577-5747 or by e-mail at cam(&-camlawudaho corn
Sincerely,
Cynthia A. Melillo
CAM
Enclosures
Cc: Steve child (via electronic mail)
Doi.ket No. T.02532A-10-0207. et at.
3. All of Midvalc's stock is curTmtly owned by Mr. Lane Williams (Mr. Williams")
Estate- of Ms. Shiiky Archer (th Estate") and each owns fffty percent (50%) of the total
To cnsute the ongoing operations of Midvale in its current form, Mr. Wilhans and
I(-- by and throuh its l3oard of Directors, have adopted an Lrnp1oyee Stock Option Program
services and employees..
•1

8 4. Midvale proposed the following struewr to foilitatc the transfer of ownership

9 S current ojCs.:to the ESOP, which will serve benefit Midvale's cuncnt employees:.
ie December 2008, Midvale adopted an ESOP plan and trust. Upon obtaining
asion approval, 'Midvale will transfer all of Midvale's assets, liabilities, public licenses,
'ecs and the CC&N to MC1 in a nix-free section 351 capitalizatIon in exchange for all the

13 and outstanding shares of MTCI stock. Following the toeiafer, the ESOP would acquire a

£ of the Midvale stock and redecri the remainder of the shares by delivery to Mr. Williams

is Estate, a Prunus&xy note Por the full value of their remaining shares. To date, the ESOP

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)0,00 set aside for stock purchase of Midvale— The annual contributions for the ESOP
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Is
19'
Due to the passage there has been a little change in the strncture here from
what was initially proposed. Since Midvale has been paying into the ESOP1r the

22 past rwo years, the ESOP is holding about $800.000 in cash. Thus, rather am a
prom sac ::nIote:frQrn Midvalv for the full amount of the stock, fly ESOP wig

24 purchase drecty from Lane Williamm as many shares as can be purchased for the

25 800,00. The cact anIO'IIJL will he deperdent on a (tflj)fl or the f5j•

26 market value at the time of purchase. The tru$ce tor the ESOP will dCenuine the

27 amount. GeeruiLy speakig, the fill vahie of the issued and outstanding shares is
estimated to be about $4,i0O,000, but each purchase will require a new
Decision No. 72728
Docket No. T-02532.A40-0207, ot al.
1 d.rjntion of fair market value. Lane Wilhims will purthase the shms held by
thiMte of Shirley Archer.. Midvale an.d'or the ESOP will then enter into an
3 option agroement to purchase the remaining shares hold by Lane WiJllaais.
4 purc.hase will oeeur unti .*ttl over a year from the date TAm Wi1liinis pn±as
5 the shares from the Estate. At that time a be made by Midvie
6 to Mr. Williams. The aniunt will depend on the detennination offltir market value
7 and the shares rentaiiàg to be purehase. The interest rate will be the market nttc
....... U. flj ülbV:t1p to ten years.
9 5. Ati r the frsncactton complete, Miclvsle s only asset win be 100°/ü awnorb1p
lO interest in MT C1 and no liabilities other than obligation for payments under the proiissorr note.
-- .--.--- L----------- ----------------------------------- -
2 as a rctirenicn fund ocnitribution for Ii employevs. The ESOP will use MTCFs annual
13 ecImtribuXons to acquire a portion of the Midaic stock held by ifr. Williams. Ultimately, the
14 ESOP, in trust for all MTCI employees., would own alt ot Mldvale's shares of stotk and Midvale
15 would own all of Miti's.
6. The App1icant.1tlMtS MTCI will pwvide the same telecommunicatkuis services
11 to MidwIes cuatornrs cusl1ni 'vt11 c.onhinue to.u.wi.. Uur e'cittug talccomnmuniritiov
18 services at the same rates tent) , and ctnditions and the only appan ii to customers will be
19 in the change of the rime of the custnmer service provider. The Applii*1i.ujher state that the
2.0 trnJet will be tranparr itt and the service will h. sks 4ud unntn!tçLd to custcnuers and
21 that Mitt employees and xxiinagetm,nt will coininue pnwiding the same 11ecornmualeation
22 serviceg as were provided prior to the zarisacton.
26 . 7 dt1 is privately-held Idaho .C-orporslion authorhed to conduct ue!in
5 Auom' win Porct ( ,rpomIfto,.ii U prinpa1 DftIee i Ic 4..atd u Muh ile lduo Mtd*tle 's
26 granted a ?CR.4 as an 1LC to provide cillth&bcd local ex1iat.go le-lecommmlic4ons
27 zcnicer, rm October 29, 19" in ie1c1on No.. 58048 Accord lig to its Maredi 11, 2010
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Dccison No. 72728
?a 4 Docket No. T-02532A-10-0207 et aL
1 LoopfLin e(urLt, Midvale srvcs approximately 1,319 rural lenti4l and 124 rural business
2 customers in five Arizona exchanges.
3 8. MTCJ is a privately-held Idaho Corporatton authorized to cot1ut business in
4 Arizona as a Foreiu. Corporation. MTCI was created to facilitate the transfer of owwrshipto
5 Midvalo employees.
6 Staff's Analysis
NI
9. Midvale provided &.tt>.C(to all of ith customers oa September 30,201 L
9 Rules
10 to, The Pubic litJity Hi1i.ng Companies and AEi1iated 1n.erusts Rules pply to all
11 Class A invesEor-wned tailities, dothed as telecommunications Qwfiers that have M...ma
1t lur13diiiona1 umusi revnucs of niom than. $1 million. Based on revenues reported in 1M 21009
13 Animal Report on file with the Cornnrission, Midvale did not generate more than $1 milhizn of
14 Arizona juxisdictional revenue; tiictefore, this Application is not sufrject to Arizona Administzative
15 Code CA.A.C.r) R14-2-801 through 805 of the Public Utiiity Holding Companies and Aftuliatad
16 1Inteiests Rti1s. However, since the Applicants are requesLiug a transfer of assets, the transaction
17 would ho subject to the Commission's r..tjj under Arizona Revised Statutes ("A.RS?') § 40..
18 285.
19
20 11- In the Application, the Applicants state that Midvale's current Arizona customers
21 Will be tmnferred to MTCI and the proposed traiatbr of eiistomcrs. wi] have no adverse impact on
22 custoirters, Cuatomm will continue to receive their existing services atTthe same rates, terms, and
23 conditions as are currently being prtwided by Midvale and will not incur any charge as a result of-
224 the th.ari8e in service provider from Midc'ale to MTCL Any ii,iture changes in the rates,, terms and
- ec)nditions will be nu jçfjjj with C issions tcqnrmeuts. The transition to MTCJ will
24 he vfrflv transparent to the affected customers.
2.7
Decwon
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No, 72728
5 Doel No. T-02$32A-ør;
Docket No. T-02532A-100207 ci al,
the App]icaØs indkate& ilmi they arc also requesting, that Midval&s ETC designation
16 Balow m summary of Staffs review oIMTCrs ETC, information
Ilm,requir=ants for a dcaignation as an ITC are et forth in 47 US-C- § 214(c)(l)
A common carrier designated as an eligible telecorjununications carrie
wider paragraph (2) or (3) shall be thgible to recthc universal service
S4Pi:(1 in CIVe with section 254 and shall throughout the service area
for which dr. deig4ion is reccived - (A) oflr the scriiices supported by
FeeraI wáversal service suppolt echanixns under section 254(c), either
using ftq own tac 1i1a and reia1e of another earner a service (including the
general distdbution.
17. in response to &ffs data requcsl.i,2 MTCI affirmed that it would provide each of
aeMces..required by the Federal universal support mechani sins nader 47 C.F,R. 54J(i1(a).
whicnt::kes the following:
a. Voice grade access to the public switched network.
b Local usage.
e. Dual toite, nfulli4equelicy 1a1ing or its f 4notioiW*nWe:A.
d. Singh party service or iu; fuuctknal equivalent
e Access to cmergency services,
£ Access to operator services.
g.Ai.cc.ss to interexehauge service.
h.Access to directory service.
I. Toll liniiation for quali4ing low-income cc!n$uzuets
I L Mconnnjttcd that it will advertise the dvm".Sbility of such services and
barges using in-c-Alve general distribution. In addltjon. MTCI states its will comply with the
27 11•'----.-
Ueizt'n IJo '
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Docket No. T-02532A-10-0207, ci
19.Ax E1'C eamr must alao oflbr Lifeline and Link Up Service to all qttuow-
consumers within its service area, pursuant to 47 C..R. ff 54.405 and :544j ..i:(a) Mid
ivnitted to provide. Lifrline and Lhk Up Services to all qualifying low income cormmers
vale tariff.
20.Since the Commission has previously accepted the definition of the Midvale service
is as rural and eligible for PUEE Staff believes that MTCI meits the requirements to be
Other
21.In order to protect the ratcpayers. Staff recommends that MCI not be. 041O
11 seek to recover through rates paid by Ath.una end-user retail custorners any incrcaad
.th LhL may re,ujt from this transwdor, and that MTCI bear aU the transaction expenses
13
iatxi with this application and '14TO.Mut be a1Jtw to or seek to recover throigh rates
14 d by Mu-Dnaand-user retail custWoft at*, 'tansitettons expenses ascciX witT This
16
17 22. Staff recommend6i thai. the Application for the trnrisir of the facilities-based ILEC
18 &N from Midvale to MTCI, the transfer of assets, IOCRI exchange customers and ETC
19 i,ation Dtmi Midvale to MTC1. and the granting of a iimite3 'th'er ....of the Commission's
20 nrwzi& rules be apjrrned Staff further recnxmncnds that pproVa1 b cunthboned on tiu
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2L AN
C. ..$.
A-
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iWo, 0554. tkcanb'r 15, 19
Decision No.
Page 8 Docket No. T-02532A-10-0201, et al
I e. MTCJ shall he required to cnipiy with all Commission rules, orders, and other
requuenient relevant to the provision of Lntrdstate teleconmunicaticuLs smylice and
2 shail modify its tariffs to conform to these rules if it is determined that there is a
conflict hnwen MT(,-'Fs tarifti and the Conrntission's rules;;
f. MrcIsbflbeiqo.ntain its accounts and, rccorsrqtziredbythe
4 Commission;
g. MTCI shall be required to tile with the Commission all financial and other reports
5

that the Commission may require, and in a form and at such times as the
Commission may designtc;
h. MTCI Shall be required to maintain an file with the Commission all current tariff
7 and rates, and any service standards that thc.Commnission may require
i MICI sMI be meq'nAed W coperale wmh Conuwsion investigalioms including, but
not l.mnitted to custorna coinplahnts;
j. MTCI shall be rquixed to partictpate in and contribute to the Atizona Universal
9 Service Fand, as required by the Coxmmision;
L M rcr shall be required to nnut the Coxniusov immt.diatcly upon changes to the 10 Applk ant's name address or telephone number and
It NMI shall be reqiured to imnediately certify to the Commnissicjn that it does , not
1-21 101XXXXdialing.
13 AW
14 1,Midvale is a public service corporation within the meaning of Atticle XV of the
Mona Constitution and A.R.S. 40-281 and 40-2S2.

2. The Commission has jurisdiction over Midvale and the subject matter of this filing
17 un.derA.R.S. 40-2.
is 3, lhe Commission, having reviewed the filing and Staffs Memorandum dated
November 30, 2011, concludes thai it I. in thr public interest to .rant the Application of Midvale
20 Telephone Exchange, Inc. and Midvale Telephone Co.rrpany. Inc. 1*.... proposed
transaction whereby Midvale will ransfer the as assets, liabilities, edstomers. CC"' and ETC.
22 designationtoMCT[.
23.
24 IT is ThMFORE OiWLi1fl that the An of Midvale Tetephane xwg', Inc.
25 and. Midvaic TeMpho' Company, Inc. in c'unection with a proposed Lrausaetion whereby
Midvale Telephone Exchange, Inc.wiLt transfer the assets, libiliuits and customers to Midvale
27 :Jphnne Company, Inc. and hereby is approved, as discussed herein.
Dccisiii No. 72728
Page 9 Doet N 0. T-02532A-10O207, et at
IT IS FURTHER ORDERED that the Appiicat2olI of Midvale Telephone Exchange Inc. to
transfer its Certificate of Convcnicncc and Necessity fin facilites-bawl local excbangt
te1econmmnicaiicus senices and ETC designatirn to Mhlv&e T1photie Company Thc, be and
hereby is approved subject to the-provisionq the-provision cotthired hereIn,.
rc Is FURTHER ORl)ERit) that the Midvale Telephone Exchange, Inc. and Wdvalo
Telephce Company,. Inc .'s request ibr a waiver of The nmissions Slamming Rules be and
hereby ig appnwed Nvith respect to the clirr3nt Application for approval of the transfer ofcutmers
between Midvai Telephone Exthane, Inc. and Mfdvale Telephone Company, 1nc.
fl IS PURTHER ORDERED that approval of the Joint Application is conditioned upon the
following.
a. Midvale 7
rates paid
fton this t
b No acquis
:n any ñit
c Aiy ng
directs.
d, Midvle i
Wiittin 60
the curreni
e. Midva]e
rmpn.iy, Inc. Ic with the Cotinah
pzire, and in a rxfl:a
's the Coix'nsion ma denexc,
kphon (ompnly, iw shaH be requn maintain on iilc wU
n all current Zeriñ and r tes and crvicc standards thai
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Deciuxi No. 2212L
J7 et a!
i1t —t jj:
WAMIA
Mr. Steve Child, CEO
Midvale Telephone Exchange, Incorporated
P. 0. Box 7
Midvale, Idaho 836450007
Dear Mr. Child:
In our correspondence dated December 1, 2010, preliminary approval was granted for the transfer by
Midvale Telephone Exchange, Incorporated (Idaho 514 and Idaho 1105) of all its operating assets and
liabilities to a newly formed subsidiary, Midvale Telephone Company (Idaho 518 and Idaho 1107).
Please be advised that with this letter, final approval is given. This approval is contingent on the
execution of the transfer documents to be prepared by your attorney Cindy Melillo in the form
RUS.