Opposition forms to TCT sale

About 50 people gathered at the fairgrounds Saturday to hear the presentation by the Save Our Co-op Committee and while the majority of those there were already opposed to sale of TCT to Big Horn Telecommunications, there were some who were either undecided about their vote or who could change their vote to no.

Committee member Bill Loveland said in an interview Monday that it appeared that the group’s efforts do have TCT worried enough that they brought their attorney, Mike Rosenthal up from Cheyenne. One of the potential buyers, Neil Schlenker, was also present with his attorney, Mike Greear of Worland. Other TCT employees were in attendance, along with members of the media.

“Our feeling was most of the people there were against the sale, but there were some who came to hear our information and who have called me and said they support what we are doing,” Loveland said.

Loveland said they have their PowerPoint presentation on their website, <http://saveourco-op.info/> as well as other information regarding the sale of TCT.

Loveland opened the meeting stating, “All we can do is talk about our opinions. I know there are two sides. People have said they don’t appreciate what we’re doing, but as a co-op member and former board member I couldn’t in good conscience not say something. We feel like, the three of us, to just give our co-op away, without looking at better options is not in our best interest or our children’s interest.”

Biggest concern

The biggest concern expressed during the public presentation is that members of the committee — original members Loveland, Evan Cozzens, George Kelso, as well as Randy Lowe and newest member Dave Hamilton — was the announced sale price of $51 million is too low for the company.

Loveland said he spoke to telecommunications experts in acquisitions who have stated it’s “not really a $51 million sale. That’s not an accurate value of what we’re getting.”

He said it’s more like $29 million, which is cash in the bank (estimated $10 million to $12 million plus the sale of TCT’s interest in Verizon at $19 million).

Loveland said if you take out the cash in the bank then it’s just the $19 million. He added that he believes TCT is worth $80 million to $90 million.

Former TCT general manager Randy Lowe provided a history of the Tri County Telephone and TCT and noted that there has been at least $100 million invested in the company, adding that the Verizon partnership has been a “gold mine” for the company. He said there is also tremendous growth potential in Cody and Powell.

“You have a profitable company with major cash flow and a service that sales itself,” Lowe said.

David Hamilton, president of Wyoming Gas, spoke on how utilities are normally sold, but noted Wyoming Gas is “in no way interested” in purchasing TCT. He said initially he thought the $51 million seemed to be a fair price.”

A closer look at the agreement, however, and he said the proposal, which provides several thousands of dollars to each co-op member ($29 million divided up between 850 members for an average of $34,000. Each amount is based on services provided and longevity of the members), looks good initially.

On the surface, he said, it looks like a good deal, but you have to go into the deal to truly understand it. He said in his opinion it appears the co-op is receiving $27.5 million — $26 million distributed on Dec. 31 closing and after closing $1.75 million.

He said he doesn’t believe the purchase price takes into consideration future earning potential in Cody and Powell. “It’s up to you, do you want instant reward or future reward,” Hamilton said.

Cozzens said, “I’ve been looking at you and wondering, what emotion, what feeling, what perspective can I share with you that will energize you enough to go back and reverse your yes vote to a no vote; that will energize you enough to persuade a neighbor or a child to do the same. That’s my goal here. I want to retain ownership in TCT. Maybe it took this kind of an offer from the buyer to help me realize exactly what I had.”

He added, “We have a treasure. We have something that’s very valuable. It’s something that’s under our control now. In a few days (Dec. 20) it very well may not be under our control any more. Are you willing for that to happen.

“TCT is not a sinking ship. It’s not even a ship in distress. In my opinion we are being offered scrap metal prices for it.”

He said after the Save Our Co-op committee met with the TCT board of directors they came away realizing TCT is in good shape and this is not the time to sale. “This is a very good time to buy if you’re a buyer.

“I’m not the buyer, I’m a present owner who does not want to sale and I want to persuade you not to sale.”

He said selling now would be like selling the goose that lays the golden egg.

Several members echoed Cozzens comments about the offer in that the benefits to co-op members are benefits to them now – including capital credit payments.

Local control and future service

George Kelso said his concern is if TCT is sold, “I question what will my service be going forward.”

Loveland noted that Internet service at his home and business is just barely adequate for his business.

Both expressed concerns about whether there would be upgrades to the smaller exchanges – the original Tri County Telephone exchanges – in the future, despite the contract calling for $10 million hold back for such upgrades.

It was noted in the meeting that the original exchanges haven’t seen any recent improvement as focus from TCT has been elsewhere.

Options

Loveland outlined three options for members that would be better alternatives than selling the company.

•Pay members $29 million from the company’s own coffers (and the sale of the Verizon partnership) and retain ownership of the co-op.

•Pay members $10 million from cash on hand with a reduced payout but retention of the company as it is.

•Pay members around twice as much as they are currently receiving from the BHT deal by selling at full value.

Questions

During public questions, members of the audience asked Board Chairman Dalin Winters about why the board didn’t put the company up for auction.

Winters said, as a co-op member, his preference is not to sale but board policy dictates that if the company receives an offer within a certain amount, and he said Schlenker’s original $46 million offer fell within that threshold, then they are required to put the sale to a vote of the members.

He said he does believe the offer is a good deal, but he is not trying to convince people to vote one way or another.

Winters said, “I didn’t expect there to be a landslide of yes votes.”

He did admit at the board meeting that for his parents it is a good deal. “They are never going to see that kind of money (in capital credits) in their lifetime.”

Winters added that at the start of the discussions with Schlenker about a year and a half ago, there were many things Schlenker had to do to get TCT to this point, “I didn’t think it would get to the point it did.”

He reiterated, “Personally I do feel (the offer) is beneficial (to the members).”

TCT employee Don Jackson said he is the one who encouraged the board not to sell the company at auction. He said usually at auctions bidders are “consolidators” and they will come in and strip a company.

Under the BHT proposal, Schlenker has said they plan to use TCT as the base as they go and try to acquire additional companies.

He added, “With all due respect, if you’re looking at full value of the company based on revenue, considering revenue in appraisals is not done. Revenue is not an indicator of profitability.”

He said if TCT’s revenue is at $85 million, that means cost of lines is $7,780, and no one has ever paid that much. If a company were to pay that much, it likely would mean an increase in rates to customers of around $84 per month.

NOTE: In last week’s article Loveland said he had concerns about the $10 million “hold-back fund.” He said there are contingencies to deduct, which could make the hold-back fund to be used on Tri County exchanges as low as $3.4 million. The article last week incorrectly quoted Loveland as saying

“In reality, if you look at it closely it could be as low as $3 million with whatever contingencies he deducts,” Loveland said.