HomeMy WebLinkAbout28233.doc BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF MIDVALE TELEPHONE EXCHANGE, INC. AND SAWTOOTH TELEPHONE COMPANY FOR AN ORDER AUTHORIZING THE MERGER OF THE APPLICANT COMPANIES. )
)
)
)
)
)
CASE NO. MID-T-99-2
SAW-T-99-2
ORDER NO. 28233
On September 29, 1999, Midvale Telephone Exchange, Inc. and Sawtooth Telephone, Inc. filed a Joint Application requesting the Commission authorize the merger of the two telephone companies with Midvale as the surviving corporation.
On November 8, 1999, the Commission issued a Notice of Application and Modified Procedure requesting comments on the proposed merger be filed by November 29, 1999. Order No. 28195. On November 29, 1999, only Staff filed comments.
Based on a review of the Joint Application, Staff’s comments, the law, and the record, the Commission grants Midvale’s and Sawtooth’s Joint Application.
BACKGROUND
Midvale is a Title 61 regulated telephone company providing services to Yellow Pine, Warren, Warm Lake, Midvale and Lakeside. Sawtooth is the wholly owned subsidiary of Midvale and provides basic local exchange service in the Stanley exchange. Midvale owns all of Sawtooth’s common stock. Sawtooth was created as a Midvale subsidiary when Midvale purchased the former Stanley exchange from U S WEST in 1994. The Commission approved the purchase conditioned upon a 3-year rate freeze for Sawtooth customers.
JOINT APPLICATION
On September 29, 1999, Midvale and Sawtooth filed a Joint Application for an order from this Commission to authorize the merger of Midvale and Sawtooth and to transfer Sawtooth’s Certificate of Public Convenience and Necessity to Midvale. Midvale and Sawtooth claim that the original basis for operating the Stanley telephone exchange as a separate subsidiary is no longer valid. The Applicants further assert that the merger is revenue neutral. Moreover, the Federal Communications Commission (FCC) treats the two companies as a single entity for purposes of federal universal service support.
The Applicants claim that the merger will be advantageous to both companies and to the Commission. They claim that both will realize cost savings by eliminating duplicate functions and by alleviating regulatory costs associated with investigating and resolving the proper allocation of joint and common costs between the companies. Finally, according to the Joint Applicants, the combined entities will have better access to capital. Operation and control of the two companies will not change. Application at 2.
The merger will require the approval and cooperation of both companies’ lenders. “Midvale has a total debt to Rural Utility Services (“RUS”) in the amount of $3,971,947 secured by a first mortgage lien on Midvale’s assets. Sawtooth has a total debt of $2,214,755 to RTFC secured by a first mortgage lien on Sawtooth’s assets. Applicants are requesting that both RUS and RTFC agree to a shared first mortgage lien on the merged entity’s assets.” Id. at 3. Until the lenders have given their consent, the companies will keep the Commission informed with regards to the ongoing negotiations with the lenders. At such time as the lenders consent to the merger, the companies will inform the Commission.
Finally, the Joint Applicants maintain that the merger is revenue neutral and will not affect the rates or charges of either company. The parties have filed a separate rate case (Nos. MID T-99-1 and SAW-T-99-1). They also request that the Commission transfer Sawtooth’s Certificate of Public Convenience and Necessity to Midvale.
STAFF COMMENTS
On November 29, 1999, the Staff filed Comments recommending approval of the merger. In evaluating the propriety of the proposed merger, Staff primarily considered whether the merger was in the public’s interest and whether customers will be adversely affected by the merger. In this case, the Applicants state the merger is revenue neutral. They further state that the merger will result in savings to both companies. Staff found that merging the companies appears to make reasonable business sense, because it should eliminate costs associated with duplicate functions and eliminate costs for personnel time, external auditor time and time answering Commission investigation questions on the proper allocation of joint and common costs between the companies.
COMMISSION FINDINGS
Midvale Telephone Exchange, Inc. and Sawtooth Telephone, Inc. are telecommunications corporations subject to the Commissions regulatory jurisdiction pursuant to Idaho Code, Titles 61 and 62. The Commission has jurisdiction over the merger of these two corporations pursuant to Idaho Code 61-302, 61-526, and 61-528.
The Commission finds the merger of Midvale with its subsidiary, Sawtooth, to be reasonable and not adverse to the public interest.
O R D E R
IT IS HEREBY ORDERED that the Joint Application by Midvale Telephone Exchange, Inc. and Sawtooth Telephone, Inc. be approved
IT IS FURTHER ORDERED that an Amended Certificate of Public Convenience and Necessity for Midvale Telephone Exchange, Inc. be issued to reflect the merger and transfer of Sawtooth Telephone, Inc.’s Certificate of Public Convenience and Necessity to Midvale.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally decided by this Order) or in interlocutory Orders previously issued in this Case Nos. MID T 99 2 and SAW-T-99-2 may petition for reconsideration within twenty one (21) days of the service date of this Order with regard to any matter decided in this Order or in interlocutory Orders previously issued in Case Nos. MID T 99 2 and SAW-T-99-2. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross petition for reconsideration in response to issues raised in the petition for reconsideration. See section 61 626, Idaho Code.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of December 1999.
DENNIS S. HANSEN, PRESIDENT
MARSHA H. SMITH, COMMISSIONER
PAUL KJELLANDER, COMMISSIONER
ATTEST:
Myrna J. Walters
Commission Secretary
O: midtt992_sawt992_cc2
ORDER NO. 28233 1
Office of the Secretary
Service Date
December 17, 1999