PacTel Says It Might Pay for Spinoff : Communications: The money--paid in the hope of speeding PUC approval--would compensate ratepayers for their interest in the company’s cellular and paging units.
Pacific Telesis is apparently willing to pay California for approval of its proposal to spin off its wireless communications operations and is privately negotiating with regulators over how much.
The payment ostensibly would be to compensate telephone ratepayers for their interests in the assets being spun off. PacTel, the parent of Pacific Bell, hopes that by agreeing to some compensation, it can speed the approval of its proposed spinoff.
“We want to do what we can to satisfy the regulators,” said Richard W. Odgers, PacTel executive vice president. “It’s worth something to us to make (the regulatory review process) go away.”
At stake is PacTel’s ambitious plan to split off its newer telecommunications ventures--primarily its cellular and paging units--from its conventional phone services to reduce government oversight of its business and spur the growth of both businesses. If a settlement figure is agreed upon, PacTel could be given a long-sought green light for the spinoff as early as September.
PacTel has asserted that ratepayers have no interest in the wireless assets, which it says were supported entirely by shareholders. But it has run into stiff opposition from consumer groups and staff members of the California Public Utilities Commission, who claim telephone customers should be compensated for what is seen as their contribution to the proposed new company.
The central compensation issue rests on the value of the Los Angeles, Sacramento and San Diego cellular licenses PacTel won a decade ago because it was the regulated phone company.
Just how much PacTel is talking about paying to compensate ratepayers could not be determined, but Pacific Telesis’ Odgers said the payment would likely involve seven or even eight figures.
However, Odgers said the problem will be in crafting a settlement that contains a plausible explanation for the payment to the company’s shareholders.
“The way we see it, the regulators figure they have a lot of leverage now in terms of our timing of this deal, so they want to extract some ‘tribute’ from us, “ he said.
Asked if PacTel considers the process blackmail, Odgers replied: “We see this as opportunistic; that’s what we call it.”
Rufus G. Thayer, a Public Utilities Commission attorney, said the two sides have held several settlement discussions already and have scheduled another for Thursday.
“If this matter goes to a full hearing before the PUC, a lot of time will be required,” Thayer said. “Pacific Telesis has the ability to resolve this quickly.”
Unveiled last December, the spinoff plan would result in two separate companies that could enter businesses that have so far been off limits under the antitrust provisions that broke up American Telephone & Telegraph in 1984 and created Pacific Telesis and the six other regional Bell companies.
Pacific Telesis has repeatedly said it wants to move quickly with the spinoff so it can complete a $750-million to $1-billion stock offering in the new company while the stock market is still riding high.
Consumer groups’ calls for a complete review of the proposed spinoff got an extra boost Tuesday at a special hearing called by state Sen. Herschel Rosenthal (D-Los Angeles), who said he feared that ratepayers could be shortchanged if the deal were approved as quickly as PacTel has demanded.
“I am concerned about Telesis’ full court press to persuade the PUC to rush to judgment,” said Rosenthal, the chairman of the Senate Committee on Energy and Public Utilities, in urging the PUC to exert its full legal authority over the review process.
