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US$9 million to help finance the project

By Fili Sagapolutele

APIA, Samoa (Samoa Observer, March 24, 2008) - A new company called Cable Enterprise would be set up to promote, fund, plan and operate the Pac Rim East fiber optic communications cable that will link American Samoa to the rest of the world.

This is according to a copy of the Letter of Intent and Agreement submitted to the territorial House of Representatives this week.

Cable Enterprise’s partners are New Zealand’s telephone company Telecom New Zealand; U.S. investor group Elandia Inc., which owns local telecom provider Blue Sky Communications, and U.S. finance company Merchant Capital, according to a copy of the letter of intent received by Pacific Magazine.

American Samoa Governor Togiola Tulafono signed the letter with the company partners in August last year and a copy was given to the House.

Togiola said last year that the American Samoa Government (ASG) would acquire one third ownership of the company and it would advance US$9 million over the next three years to assist in financing the fiber optic project.

According to the letter, the territorial government and Cable Enterprise have begun negotiations to acquire the Pac Rim East undersea fiber optic cable and for the redeployment of the cable from American Samoa to the Hawaiian island of Oahu, as well as the conditions of post-redeployment operation, maintenance and marketing of the cable.

The letter of intent described the redeployment cable as the American Samoa to Hawaii Cable, or ASH-Cable.

The parties have agreed to a business model, referred to as the "single purpose entity" or SPE and will be organized under the laws of Delaware as a limited liability company.

A copy of the letter was also provided to the House of Representatives.

According to the letter, Cable Enterprise, on behalf of SPE, and with the assistance of the territorial government, will arrange financing that will fund the acquisition of the cable, the necessary landfall stations plus the physical relocation and redeployment of the cable for US$18 million (WST$45 million).

The letter says that funding for portions of the fiber optic cable project will be arranged through the issuance of revenue bonds in the approximate principal amount of US$11.6 million (WST$29 million).

The bonds, to be repaid over a 12-year period through 2020, will be secured and repaid from revenues generated by the company that will own the cable, prior to any distributions to equity holders.

It also says that the territorial government’s US$9 million share in the project will be made in three annual installments with the first due December 1, 2007.

The other two payments of US$3 million are due in December 2008 and 2009. (The U.S. Department of Interior’s Office of Insular Affairs budget for fiscal 2008 includes US$3 million for the fiber optic cable, while the other US$3 million will come from the US$20 million loan the territorial government received from the local government employees Retirement Fund.)

The letter also provides that the SPE will enter into agreements for the maintenance, operation, management and marketing of the cable system and that the terms of the agreement "must be commercially reasonable."

It also states that a portion of the cable system’s transmission capacity will be available for lease at standard rates to be published by SPE in accordance with all applicable governmental laws and regulations to all entities licensed to provide telecommunications services within American Samoa.

According to the business model, Samoa will utilize a portion of the fiber optic cable. However, no connections may be made unless and until all required governmental agreements and permits are obtained.

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