CNMI OKS SALE OF VERIZON MICRONESIA

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By John Ravelo

SAIPAN, CNMI (Saipan Tribune, June 17) – Over a year and nine months after Micronesian Telecommunications Corp. and Pacific Telecom Inc. jointly applied for the approval of transfer of all common stock, the Commonwealth Telecommunications Commission issued last night a final order that eliminated regulatory impediments to the multi-million-dollar sale of Verizon Micronesia.

The commission, however, also ordered a contested case proceeding on competitive issues related to Verizon's sole ownership of the CNMI's only interisland cable, asserting its jurisdiction over the matter.

The final order, consisting of 107 pages plus about a hundred pages of background documentation, gives PTI the legal mandate to proceed with the acquisition of MTC's common stock and take over Verizon, the CNMI's biggest telecommunications company.

However, it provides the parties-including Gov. Juan N. Babauta and CNMI consumer counsel Brian Caldwell-30 days within which to seek rehearing or reconsideration.

"We approve this transfer of ownership of MTC's stock, and with it control over the Certificate of Public Convenience and Necessity and over the franchise, with the clear understanding that telecom service is critical to the future of the CNMI," the commission said in a statement.

The commission declared that PTI and MTC have met the burden of proving that the transfer of ownership would serve the public interest. It approved the settlement reached between the applicants-MTC and PTI-and the intervenors-Babauta and Caldwell, who had opposed the sale on several grounds, including Verizon's cable monopoly.

"This approval will produce many benefits for CNMI consumers. It will produce free interisland calls between Saipan, Tinian, and Rota. It will ensure that rates remain stable for five years and that long distance rates remain 'rate integrated for five years,'" the CTC said.

"It ensures that the telecommunications system in the CNMI remains first rate and that regular upgrades of the system will occur. It ensures employee protection and establishes a stock sharing program for employees," it added.

The commission assured that Verizon remains financially secure, saying that its profits have even exceeded industry standard. It said Verizon's performance in the last 18 months exceeded predictions.

It expressed concern, however, over PTI's borrowing of money to finance the multi-million-dollar purchase of Verizon, noting that one of its current strength is its strong profit and low debt.

"While the debt [of PTI] can be financially accounted for and paid off potentially, we are concerned that it was acquired to finance the company," the CTC said. "This order requires regular financial reporting as well as restrictions on additional debt. We must be wary given the Enron and Adelphia situations. We do not want those to happen here."

The CTC also issued a separate ruling that asserted its jurisdiction over cable-related matters. It also declared that its authority over the matter is not preempted by federal law, saying that the cable provides both interstate and intrastate service.

"Because both the federal [Federal Communications Commission] and CNMI regulatory schemes seek to broaden competition, they are compatible, and there is concurrent jurisdiction," the CTC said.

The 46-page opinion and order lays out procedures and guidelines regarding the contested case proceeding. "We do not try to predetermine the outcome of the dispute over ownership or other control of the interisland cable. That is, of course, a decision which will rest on the facts and applicable law."

The CTC came out with the final order exactly four months after it ordered executive director Adam Turner to do so.

"We worked very hard on this order. It's a professional product that responds to all the issues," said Turner.

The CTC is comprised of chairman Norman Tenorio and commissioners Mike Fitzgerald and Josephine Mesta.

June 17, 2005

Saipan Tribune http://www.saipantribune.com

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