City Council To Narrow Down Burlington Telecom Bids

Oct 16, 2017

The three bidders hoping to buy Burlington Telecom will be narrowed down to two after the city council meets on Monday evening.

The three prospective buyers were announced in September and include two out of state companies, Tucows/Ting, based in Toronto and Schurz, based in Indiana. The third bidder, Keep BT Local, is a local co-op.

The City Council, which initially reviewed eight bids to buy Burlington Telecom, whittled that group down to four, mostly during executive sessions this summer. The fourth finalist dropped out of the sale process before the city released the names of the finalists in September.

Bidder bio: Ting
Tucows, the parent company of Ting, is an internet service provider headquartered in Toronto, Canada. They’re offering $27.5 million in cash for Burlington Telecom.

Ting was started five years ago by Tucows and offers cell phone service as well as providing all-fiber Internet service in several cities around the country, including Charlottesville, Virginia and Westminster, Maryland.

Bidder bio: Schurz

Schurz is a family-owned, Indiana-based media and communication company that was founded in 1872. They’re offering $30.8 million for Burlington Telecom, the highest of the three bids.

Schurz started off publishing daily and weekly newspapers, eventually expanding to operate radio, TV and broadband facilities. In 2015, Schurz announced it was selling its TV and radio stations to Gray TV.

According to the company’s letter of intent to buy Burlington Telecom, since selling its TV and radio station, it’s “actively pursuing opportunities” to expand their existing broadband facilities and acquire new ones – like Burlington Telecom.

Bidder bio: Keep BT Local

Keep BT Local is a co-op formed expressing for the purposing of buying Burlington Telecom. The co-op is offering $12 million, with $10.5 million in cash and the city keeping $1.5 million in non-cash equity in the company. Essentially, Keep BT Local would own 87.5 percent of Burlington Telecom and the city would own 12.5 percent of the company.

The co-op is financing the deal with Maine Fiber, which has agreed to lend Keep BT Local $10 million at 14 percent interest rate. If Keep BT Local won the bid, all current subscribers to Burlington Telecom would automatically become members of the co-op.

The similarities

All three bidders would agree to an ‘anti-monopoly sales’ sales restriction. Eileen Blackwood, the city attorney, said the restriction will maintain one of the original purposes of Burlington Telecom.

“[Burlington Telecom] was intended to be something to stop the development of a monopoly in those areas,” Blackwood said. “These folks have all agreed to have some restrictions on their future sale to any entity that would result in a monopoly in the market.”

All three proposals also make commitments to net neutrality policies and allow the city to maintain some amount equity in Burlington Telecom.
 

Who is going to be eliminated Monday night?

It’s not definite which two bid move forward. Each councilor will get one vote Monday night and the two proposals with the most votes will advance to the final stage of the sale process.

Last week, Burlington Mayor Miro Weinberger said the city council shouldn’t advance Keep BT Local's bid. He said the group’s efforts have made sure the future of Burlington Telecom will be better, but that their proposal to buy the company was not "viable."

“Even if we were to try to accept it, I think the result of that acceptance would be years of litigation and regulatory conflict and uncertainty and I don't think there is a path through for that to work,” Weinberger said. “And that's why I said as much as we would like otherwise, I don't think it's a viable proposal.”

Keep BT Local responded to the mayor’s comments and emphasized their commitment to buying Burlington Telecom.

Alan Matson, chairman of Keep BT Local, said if their bid is successful, they'll be ready to run the company.

“And to that end, we have a great number of supporters within the community, business leaders, political leaders etcetera,” he said. “We've begun to put together a core group of those leaders who we've been talking with over time and who have also agreed to work with us on the transition.”

Ultimately, the city council will make the final call on which two bids move ahead. The council is hoping to pick the final bid by the end of October.

Why is Burlington Telecom for sale?

The sale of Burlington Telecom comes after years of litigation, financial trouble and public debate.

In 2009, Burlington used $16.9 million from the general fund to support the struggling company — the city spent $50 million, when it had only budgeted for $33 million. Eventually, Burlington Telecom couldn’t make its lease payments to Citibank and in 2011, the bank filed a lawsuit against Burlington, suing for $33.5 million.

Weinberger took office in 2012 and earlier this summer said in an interview he believed that a major reason he won as because of the problems with Burlington Telecom and his promise to resolve them.

Under Weinberger’s administration in 2014, Burlington reached a settlement with Citibank. The bank got $10.5 million and the city agreed to sell Burlington Telecom.

Part of the money the city used to pay Citibank, $6 million, came from a financing agreement with Blue Water Holding, a company formed by local businessman Trey Pecor.

Burlington wants to have a buyer locked in by January 2018 because, under the terms of the settlement, after that date, the amount of money the city recoups from the sale will go down.