Latest Battle in PacTel Merger Deal: Rebates
Consumer advocates see big bucks in the proposed merger of Baby Bells Pacific Telesis and SBC Communications.
The watchdog group Toward Utility Rate Normalization has asked the state Public Utilities Commission to order $1 billion worth of refunds for Pacific Bell’s California customers if the merger is approved early next year. The PUC’s own Division of Ratepayer Advocates has gone even further, requesting that $2.1 billion in rebates be paid out over five years.
The merger partners--who responded to the refund requests last week--say they will call off their $16-billion deal if they are ordered to provide billion-dollar rebates.
“I personally find it impossible to see how it could be made to work,” and TURN and the DRA probably know that, said Dick Odgers, general counsel for Pacific Telesis, the parent of PacBell.
The latest squabble in the complicated process of combining two telecommunications giants is based on Section 854 of California’s PUC code, which says that “ratepayers should get no less than 50% of the benefits” from a merger in the form of a refund, said Tom Lew, project manager for the DRA.
Consumer advocates peg those savings at $2.1 billion, and TURN figures that half that savings should be refunded to customers. The PUC ratepayer advocates say customers deserve it all.
But Bob Ferguson, managing director of external affairs for Southwestern Bell in San Antonio, asserts that the merger is expected to net California at least 1,000 new jobs because the combined companies will base their international, long-distance and Internet operations in the Golden State.
That should exempt SBC and Pacific Telesis from the mandatory rebate law, which was designed to compensate the state for mergers and acquisitions that result in widespread office closures and layoffs, Ferguson said.
But even if the law is applied, the savings are only a fraction of the $2.1 billion estimate, he added. Pacific Telesis pegs the savings in the neighborhood of $220 million.
Odgers said the phone companies would rather decide for themselves how merger savings should be passed along to customers.
Hearings at the PUC are scheduled to begin Thursday and are expected to last a month. A decision probably won’t be proposed until February or March.
