GTE to sell some telephone properties in Texas and all local properties in New Mexico to dba Communications, LLC.
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IRVING, Texas -GTE has agreed to sell 399,084 customer access lines in New Mexico and parts of Texas to dba Communications, LLC, a closely-held new entrant in the telecommunications industry. Financial terms were not disclosed.
dba Communications was formed by the private equity firms of Welsh, Carson, Anderson & Stowe (WCAS), Vestar Capital Partners, and Citicorp Venture Capital in partnership with several prominent Hispanic-American investors with long-standing ties to the business community and governmental institutions in the Southwest.
The transaction includes 197 of GTE's local telephone exchanges and 307,180 access lines (YE'98) in Texas, as well as all 36 GTE local exchanges and 91,904 customer access lines (YE'98) in New Mexico. More than 400 GTE employees in the two states will become employees of dba Communications at the closing of the sale.
Upon closing, dba Communications will be among the 20 largest local exchange companies in the United States, as measured by access lines.
This is the most recent agreement in GTE's previously announced initiative to sell approximately 1.6 million telephone lines in the United States. To date, GTE has agreements to sell more than 1.3 million access lines in 10 states.
"We are very pleased with this transaction. It represents another significant milestone in our wireline property repositioning process and a major step toward increased ownership diversity in the telecommunications industry," said John Appel, president - GTE Network Services. "Equally important, the agreement includes provisions for the fair and equitable treatment of the affected GTE employees in Texas and New Mexico."
Among the Texas communities served by GTE that are part of the transaction: Andrews, Brownfield, Dumas, Levelland, Perryton, and Pecos in West Texas; and Crockett, Fairfield, and Texarkana in East Texas. In New Mexico, communities including Carlsbad, Hobbs, Lovington, and Ruidoso will be served by dba Communications.
It was also announced that Anne K. Bingaman, formerly a member of the senior management team at LCI International (now Qwest Communications) and former U.S. Assistant Attorney General for Antitrust, will serve as Chief Executive Officer of dba Communications.
"dba is excited about the opportunity to serve our new communities in Texas and New Mexico," Bingaman said. "We are confident that with the dedicated team of local employees already in place, dba will continue to offer quality voice and data communications services and become a valuable partner in the communities we serve."
Thomas E. McInerney, a general partner at Welsh, Carson, Anderson & Stowe, said: "dba represents the latest in a series of large transactions led by WCAS in the telecommunications industry. The formation of dba Communications to acquire these properties from GTE reflects the belief that the local access market in rural communities provides a unique investment opportunity. dba Communications will focus on providing outstanding local customer service and providing additional services and features to its customers to allow them to benefit from the continued evolution of communications technology, including Internet access and high-speed data access."
Federico Pea, senior advisor to Vestar Capital Partners and former Secretary of Transportation and Energy in the Clinton Administration, said: "We and the Hispanic investors appreciate the opportunity GTE has provided to encourage minority entry into the rural telecommunications market and we look forward to delivering quality service to the communities we will be serving in Texas and New Mexico."
Since May, GTE has reached agreements to sell:
Proceeds from the sale of GTE wireline properties - as well as GTE Airfone and GTE Government Systems - will be used for investment in other strategic initiatives, including GTE's recent purchase of Ameritech wireless properties in Illinois and Missouri.
The deals do not affect GTE's offering of wireless, long distance and Internet services to customers in Texas and New Mexico. Current directory publishing agreements will continue at least until December 31, 2001. In addition, current rates will remain in effect, but may be subject to review by state and federal agencies after the closing of the transaction.
Approval of the sale is required by the Texas and New Mexico regulatory commissions, the Federal Communications Commission, and the U.S. Department of Justice. The closing of the sales and transfer of GTE operations to dba Communications are expected to be complete by mid-year 2000. Post closing, GTE will still own and operate wireline properties serving more than 1.65 million access lines in Texas.
Bank financing for the transaction will be provided by Bank of America, Chase, CIBC World Markets and Lehman Brothers.
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With 1998 revenues of more than $25 billion, GTE is a leading telecommunications provider with one of the industry's broadest arrays of products and services. In the United States, GTE provides local service in 28 states and wireless service in 17 states, as well as nationwide long-distance, directory, and internetworking services ranging from dial-up Internet access for residential and small-business consumers to Web-based applications for Fortune 500 companies. Outside the United States, the company serves customers on five continents. Additional information about GTE can be obtained at http://www.gte.com.
About dba Communications, LLC
Communications, LLC, is a closely-held new entrant in the telecommunications industry formed to acquire the local access lines being sold by GTE. dba Communications is currently based in Washington D.C, but plans to announce a new Headquarters in the Southwest Region of the country. dba Communications was formed by Welsh, Carson, Anderson, & Stowe (WCAS), a leading private equity investor in telecommunications with over $8 billion in capital, in partnership with a prominent group of Hispanic-American investors whose roots are in the Southwest - specifically in New Mexico, Texas, Colorado and Arizona. In addition to WCAS, Vestar Capital Partners and Citicorp Venture Capital are significant investors in dba Communications.
Welsh, Carson, Anderson & Stowe is a private equity investment firm founded in 1979. WCAS currently manages over $8 billion in private equity capital and focuses on investing in the information technology, telecommunications, and healthcare industries. Vestar Capital Partners is a private equity investment firm founded in 1988. Vestar has completed 30 investments with an aggregate transaction value of approximately $7 billion. Citicorp Venture Capital, founded in 1969, manages an investment portfolio that includes over 150 companies with aggregate annual revenues exceeding $35 billion.