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W W W. M A I N E B I Z . B I Z 11 A P R I L 1 7 , 2 0 1 7 smile by alex No one has a smile like you. And no one can keep it healthy like us. Like Alex, your smile is unique. It deserves Delta Dental, the nation's leading dental benefits provider. With the largest network of dentists nationwide, quick answers, and personalized service, we make it easy to keep your smile healthy. www.nedelta.com Northeast Delta Dental Witnesses raise questions about FairPoint's $1.5 billion merger B y J a m e s M c C a r t h y T he proposed $1.5 billion merger of FairPoint Communications Inc. and its Illinois-based suitor, Consolidated Communications Holdings Inc., passed a key hurdle when shareholders overwhelmingly approved the transaction on March 28, following the unanimous endorsement by both companies' boards of directors. Which isn't surprising, since stated objectives of the acquisition include: increasing shareholder value, improving financial stability and access to capital, achieving "synergies" that enable the combined com- pany to compete more effectively in the highly com- petitive broadband and telecommunications markets. It didn't hurt that as part of the transaction, Consoli- dated had committed to refinancing FairPoint's $916 million debt at a reduced interest rate, something that shareholders of both companies would recognize as beneficial to their long-term investment interests. Now comes the tough part. The merger is subject to federal and state regulatory approvals that will focus more on the public benefits of the proposed merger. The Maine Public Utilities Commission's regulatory approval process — which was launched by a Dec. 29, 2016, petition from the two companies — expressly invites expert witnesses representing additional stake- holders to weigh in on the proposed merger. Key experts who've already filed public testimony with the PUC concede that Consolidated and FairPoint shareholders might well benefit from the merger, but they also express skepticism about whether the pro- posed merger would benefit consumers and lead to improved telephone and broadband services in Maine. Testimony reveals two overarching concerns: 1. How will $55 million in expected "annual operating synergies" impact FairPoint workers, customers? Peter McLaughlin, business manager for the International Brotherhood of Electrical Workers Local 2327, identified as a labor intervenor in the PUC case, red-flagged Con- solidated's expectation that the merger would generate roughly $55 million of "annual operating synergies" by the end of the second year after closing. Up to $45 million of those synergies, he said, would apply to "cor- porate operating costs, IT-support operating costs and network and operating efficiencies." McLaughlin noted that Consolidated also stated at a Feb. 21 technical conference "it hopes to achieve a 9% or 10% reduction in FairPoint's annual operations' expenses." "'Synergies' and 'efficiencies' are another way to say 'downsizing,'" he testified. "Downsizing is a com- mon and often inevitable consequence of any merger of this magnitude … Given what we know about the 'bare-bones' nature of FairPoint's current systems and operations, additional reductions of 9% or 10% in the company's equipment and employees can only dam- age the quality of telephone service that Consolidated will deliver to Maine customers." Another labor intervenor, Randy Barber, president of the Center for Economic Organizing, added: "If the synergies target is not achieved, there could be seri- ous financial problems for Consolidated." 2. Will the merger lead to improved services for FairPoint's Maine customers? David Brevitz, a chartered financial analyst who special- izes in telecommunications regulatory issues, urged the PUC to press Consolidated for more details about "benefits and changes for Maine consumers from the proposed transaction." Barber recommended that the PUC defer its ruling on the merger until the companies provided "more Maine-specific data covering the next five years," including "plans to improve service quality and pro- jected employment levels." If the PUC does end up endorsing the merger, Bar- ber recommended that it should require Consolidated to identify "specific areas of needed additional capital investments in Maine, including broadband speed upgrades for more customers" as well as to "increase staffing to remedy shortcomings in FairPoint Maine's network, plant and operations." The PUC process includes opportunities for Fair- Point and Consolidated to cross-examine the intervenor witnesses as well as to present testimony from their witnesses supporting the benefits of the merger. P O L I T I C S & C O.

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