20140923Notice of Pro Forma Transaction.pdf

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Jean L. Kiddoo
Russell M. Blau
Jeffrey R. Strenkowski
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russell.blau@ bingham.com
jeffrey.strenkowski@ bingham.com
September 19,2014
Via E-Mail and Overnisht Deliven
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 W . Washington Street
Boise, lD 83702
secretary@puc. idaho.gov
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Re: Notification Regarding a Pro Foruza Intra-Corporate Transaction
Dear Ms. Jewell:
Windstream Holdings, Inc. ("Windstream"), Mcleod Telecommunications Services,
LLC, (the "Windstream Licensee" or "Windstream Companies"); Communications Sales
and Leasing, Inc. ("CSL"), Talk America Services, LLC ("TAS") (Windstream, the
Windstream Licensees, CSL and TAS collectively, the "Parties"), by their undersigned
counsel, hereby notifu the Idaho Public Utilities Commission ("Commission") of a pro
.forma intra-corporate transaction in which the Windstream Licenses intend to transfer
ownership of certain of their assets to CSL or one of its wholly owned direct or indirect
subsidiaries, and for CSL to lease those assets back on an exclusive, long-term basis (the
"Transaction"). The proposed Transaction will comprise only of intra-company pro
forma transfers insofar as the ultimate shareholders of the Windstream Licensees and
CSL at the time of the Transaction will be the same.
As part of the Transaction, the Windstream Licensees will also transfer their residential
local and long distance customers to TAS. Written notice will be provided to all of the
affected customers. TAS, a subsidiary of CSL, will submit an application (the
"Certification Application") for a certificate to operate in Idaho as a competitive local
exchange and long distance carrier in order to provide intrastate service to the residential
customers being assigned as part of the Transaction. It is the Parties' understanding that
approvalisnotrequiredfortheproformaTransactiondescribedherein. Accordingly,the
Parties submit this letter for informational purposes to assure the continuing accuracy of
the Commission's records.
The Parties
Windstream, a Delaware corporation headquartered at 4001 Rodney Parham Road, Little
Rock, Arkansas72212, is a publicly traded (Nasdaq: WIN) S&P 500 diversified
communications and entertainment company. Windstream' s subsidiaries provide local
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Jean D. Jewell, Secretary
September 19,2014
Page2
and long distance telephone services, data hosting services, broadband and high-speed
data services and video services to customers throughout the United States. Together,
Windstream's operations currently have approximately 3.4 million connections (i.e.,
voice lines, high-speed Internet lines, digitaltelevision customers) and approximately $6
billion in annual revenues. More information about Windstream and its operations can be
found at www.windstream.com/about. Windstream does not provide telecommunications
services in its own right. It owns and operates a number of licensed telecommunications
providers in all states and the District of Columbia, except Alaska, many of which also
hold authority from the FCC to provide domestic interstate and international
telecommunications services.
In Idaho, Windstream's regulated subsidiaries hold the following authorizations:
l. Mcleod Telecommunications Services, LLC is authorized to provide local
exchange service, private line switched access service, and intraLATA toll
service pursuant to Certificate No. 325.
2. PAETEC Communications, Inc. is authorized to provide interexchange service.
3. Windstream Communications, Inc. is authorized to provide interexchange
service.
4. Windstream NuVox, Inc. is authorized to provide localexchange service
pursuant to Certificate No. 502.
TAS, a Delaware limited liability company, is a newly created subsidiary of CSL. TAS
is separately seeking authority in the Certificate Application to become a provider of
local exchange and interexchange service. Its immediate parent, CSL, is currently a
Windstream subsidiary, but will be spun-off to become a separate, publicly traded
company (as described below). Upon receipt of necessary regulatory commission
certificates to operate as a telecommunications service provider and after notice to
customers, the residential customers of the Windstream Licensees will be assigned to
TAS, which will provide their telecommunications services pursuant to its new
certificate.
Overyiew of Transaction
Windstream is planning an intra-corporate transaction (the "Transaction") in which its
business will be divided into two independent units: an operating unit that will continue
to provide telecommunications and related services, and a real estate investment trust unit
that will hold title to certain distribution plant assets (the "Subject Assets"), none of
which are located in South Dakota, and will lease those assets exclusively to the
Windstream Companies on a long term basis. Under the Transaction, the Subject Assets
of the Windstream Companies, including copper, fiber, real estate and other network
assets, will be transferred to CSL, a newly established corporation, and CSL will lease
them back to Windstream on a long term basis for the exclusive use and benefit of the
Windstream Companies. CSL will elect to operate as a Real Estate Investment Trust
Singham McCutchen LLP N76323441
bingham.com
Jean D. Jewell, Secretary
September 19,2014
Page 3
("REIT"), and both CSL and Windstream will thereafter be independent publicly traded
companies whose stock will trade independently of the other.
Once TAS has obtained the requisite regulatory commission certifications to operate as a
competitive local exchange and interexchange carrier in ldaho and other states, and
following notice to affected customers, the residential local and long distance customers
of the Windstream Licensees will be transferred to TAS. The CLEC Licensees will
retain all of their business customers, and will also retain their existing certifications in
Idaho and other states in order to continue providing services to those customers.
The Windstream Companies' operations and provision of service will not change as a
result of the Transaction. The Windstream Licensees will continue to provide the same
services to their business customers, at the same rates, and pursuant to the same tariffs
and under the same names, as they do now. Upon the certification of TAS and the
assignment of the residential customers to it, TAS will provide the same high quality
service that the Windstream Licensees do today.
Aside from a change in the name of their telecommunications provider, this residential
customer base transfer will be virtually invisible to the customers transferred to TAS, and
the rates, terms, and conditions of service provided to the transferred residential
customers will not change as a result of the transfer. TAS will assume the residential
customer contracts and relationships that the Windstream Licensees have with their
residential customers. Where services are provided pursuant to filed tariff, TAS will
adopt the tariffs of the Licensee or file tariffs that incorporate such rates, terms and
conditions of service. Where services are provided on a non-tariffed basis, TAS will
continue to provide service to the customers pursuant to the relevant service contracts or
price lists.
TAS will initially operate as a reseller of the Windstream Licensees' local exchange and
interexchange services. Accordingly, in the Certificate Application TAS seeks
certification to be a resold competitive local exchange and resold interexchange
telecommunications service provider in Idaho. The customer transfer to TAS will not be
consummated until TAS has received all required regulatory authorizations to provide
interstate and intrastate telecommunications services and has complied with FCC and
state requirements for notice to the affected customers. Attached hereto as p1$!!!3! is a
sample notice that would be provided to the CLEC Licensees' customers at least 30 days
prior to the transfer to TAS.
The assignment of customers to TAS will not take place until after the consummation of
the pro forma Transaction in which its parent, CSL, will be spun-off from Windstream
and operate as a separate publicly-traded company, initially with the same shareholders
that own Windstream. Accordingly, at the time that the customers are assigned and TAS
begins operation under a new certificate, it will no longer be an indirect subsidiary of
Windstream, although its ultimate shareholder owners will be the same as Windstream's
shareholders.
Bingham M(Cutchen LLP N76323441
bingham.com
Jean D. Jewell, Secretary
September 19,2014
Page 4
Public Interest Considerations
The Parties submit that the Transaction including the customer assignment is consistent
with the public interest. The Windstream Companies operate in an industry that has been
and continues to be subject to rapid technological advances, evolving consumer
preferences, and dynamic change. The public convenience and necessity require that the
Parties increase their efficiencies and lower their costs by means of efforts like the
Transaction so that they can continue to provide the full range of advanced high quality
services to residential and business customers.
The CLEC Licensee customers willreceive the same high quality local exchange and
long distance service as they do today, subject to the same rules, regulations, and
applicable tariffs. The Transaction will not affect the CLEC Licensees' service quality
obligations or tariffs. Further, any subsequent end user rate changes will continue to be
governed by the same rules and procedures as they are today, and the terms and prices for
existing wholesale services under applicable tariffs or agreements will remain unchanged
as a result ofthis Transaction. Consequently, for the reasons stated above, the transfer of
customers to be undertaken as part of the Transaction is consistent with the public
convenience and necessity and is in the public interest.
The Parties request that the Commission associate this notice with the TAS Certificate
Application, and approve its request for authority to operate as a competitive local
exchange and interexchange service provider.
An original and seven (7) copies of this letter are enclosed for filing. This notification
has also been filed via email. Should you have any questions concerning this filing,
please do not hesitate to contact the undersigned.
Respectfully submitted,
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Jean L. Kiddoo
Jeffrey R. Strenkowski
Bingham McCutchen LLP
2020K Street, N.W., Suite 1100
Washington, DC 20006-1806
202-373-6000 (tel)
202-373-6001 (fax)
[e-mail]
j effrey. strenkowski@b ingham. com
Counselfor the Parties
N76323441Eingham M(Cutchen LLP
biflgham.com
Exhibit A
Sample Customer Transfer Notice
Dear Valued Customer,
Windstream Communications, lnc. and certain its affiliates ("Windstream") are divesting certain of its
local exchange residential markets to Talk America Services, LtC ("Talk America"). As a result of the
transaction, your local and long distance service will transfer from Windstream to Talk America on or
about January 30, 2015.
Rest assured you will continue to receive the high-quality service you have come to expect. They will be
no change in your current plan, rates, features, terms and conditions of your service or customer service
contracts. Also, there will be no charges associated with transferring your service to Talk America and no
action is required by you during this transfer.
As a customer, you have a choice in carriers for your communications services. lf you choose to select
another provider, you should contact that carrier immediately to ensure that your services are
transferred before January 30, 2015. Keep in mind, if you change carriers, you may have to pay a
transfer charge.
Under Federal Communications Commission rules, any restriction or "freezes" you may have placed on
your account to block changes to your preferred local and/or long distance carrier will be removed as
part of the transfer process. lf you wish to reinstate such restrictions, please contact us at 1-800- XXX-
xxxx.
Customer service is the foundation of our business. Please let us know how we can work with you to
meet your needs. lf you have any questions or complaints before, during, and after the transition of
your service to Talk America, do not hesitate to contact us at 1-800-XXX-XXXX.
Be sure to look for more information from us during the upcoming months. We are excited about
serving you and look forward to providing you with the same high-quality, innovative products and
services in the future.
Sincerely,
Talk America Services, LLC